Dec 300/91 M Print J7400

AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Industrial Relations Act 1988

NATIONAL WAGE CASE APRIL 1991

s.113 applications for variation

Metal Trades Industry Association of Australia

(C Nos 22135 and 22136 of 1990)

METAL INDUSTRY AWARD 1984 - PART I(1)

(ODN C No. 02568 of 1984)

METAL INDUSTRY (SUPERANNUATION) AWARD 1989(2)

(ODN C No. 05029 of 1986)

Australian Road Transport Industrial Organization

(C No. 32944 of 1990)

TRANSPORT WORKERS AWARD, 1983(3)

(ODN C No. 01520 of 1982)

The Federated Millers' and Manufacturing Grocers'

Employees' Association of Australasia

(C Nos 33094 and 33095 of 1990)

MILLING INDUSTRY AWARD 1990(4)

(ODN C No. 00474 of 1948)

MANUFACTURING GROCERS AWARD 1985(5)

(ODN C No. 01152 of 1985)

s.99 notifications of industrial disputes

Northern Territory Confederation of Industry and Commerce Inc.

and

Federated Clerks Union of Australia

(C No. 32900 of 1990)

The Federated Miscellaneous Workers Union of Australia

(C Nos 32904, 32905, 32906 and 32907 of 1990)

Printing and Allied Trades Employers' Federation of Australia

and

Printing and Kindred Industries Union

(C No. 32896 of 1990)

_______________________________________________________________________________

(1)Print F8925 [M039] (2)Print H8821 [M309]

(3)Print F2076 [T140] (4)Print J4295 [M046]

(5)Print G0585 [M003]

2 NATIONAL WAGE CASE APRIL 1991

Municipal Association of Victoria and others

and

The Municipal Officers' Association of Australia and others

(C No. 32898 of 1990)

Confederation of A.C.T. Industry

and

Federated Clerks Union of Australia

(C No. 90181 of 1990)

Shop, Distributive and Allied Employees Association

(C No. 90182 of 1990)

JUSTICE MADDERN, PRESIDENT

DEPUTY PRESIDENT KEOGH

DEPUTY PRESIDENT HANCOCK

COMMISSIONER CONNELL

COMMISSIONER OLDMEADOW MELBOURNE, 16 APRIL 1991

REASONS FOR DECISION

These matters involve claims for increased rates of pay and superannuation contributions and new or modified principles of wage fixation.

BACKGROUND

In its August 1989 National Wage Case decision,(6) the Commission determined that the principles of wage fixation established in that decision would operate until reviewed and that a review would commence, on application, in September 1990. The Commission, in so deciding, assumed that the unions would, consistent with past practice, file the necessary applications to provide the jurisdictional basis for the review to commence at the time indicated. That did not occur. In fact, formal applications were not filed until late November 1990, although a number of relevant dispute notifications, pursuant to section 99 of the Industrial Relations Act 1988 (the Act), were lodged in October and November 1990.

In the meantime, proceedings were held in the Commission - on 13 and 14 September 1990 - in response to notifications by the Confederation of Australian Industry (CAI) and The Australian Chamber of Manufactures (ACM) that:

". trade unions had made demands on a wide range of industries in accordance with a Resolution of the Executive of the Australian Council of Trade Unions (ACTU) dated 22 August 1990; and

. the Resolution endorsed 'claims by unions for negotiations with employers designed to achieve implementation of the ACTU/Government agreement including wages increases based on profitability/ productivity/market adjustments'."

_______________________________________________________________________________

(6)Print H9100

NATIONAL WAGE CASE APRIL 1991 3

They asked that the matters which led to the August 1989 National Wage Case decision be relisted so as to enable the review of the principles of wage fixation to commence.

On 17 September 1990 the Commission issued a decision in which it said:

"The current wage fixing principles do not prohibit unions from serving claims on employers designed to raise issues about a changed or new system of wage fixation; nor can there be any objection to discussions to clarify such claims. However, both the unions and employers participating in those discussions must bear in mind:

(i) the danger of raising false expectations in the community;

(ii) the obligation to avoid industrial action: industrial action in support of the claims would contravene the wage fixing principles and the unions' formal commitments to those principles prescribed in their awards - as was stated in the National Wage Case decision of August 1989, those commitments:

'continue to operate until the principles as amended in this decision are reviewed. Upon application, that Review will commence in September 1990'; and

(iii) the necessity for the Commission to approve any agreements that might be reached: approval cannot be assumed - any such agreements will be tested against the principles laid down by the National Wage Case decision of August 1989 or whatever principles replace them after a Review . . ."(7)

The proceedings in this case were also preceded by a series of conferences involving the Commission and the major parties and interveners. The first set of conferences arose from the August 1989 National Wage Case decision to "conduct a review of the progress of both structural efficiency and minimum rates adjustment exercises in May 1990".(8) A second set also arose from that decision and were held to hear "argument about the future of paid rates awards".(9) The third set of conferences arose from the Commission's decision of 17 September 1990 and were called to consider further both the differences between the parties and the formal steps necessary to set in train a review of the current wage fixing principles. Summaries of the results of those conferences are attached as Appendices B (the May Agreement), C (the Paid Rates Review Agreement) and D (the November Agreement) to this decision.

On 3 December 1990, the Commission commenced proceedings in relation to the review of the principles of wage fixation and to determine the formal applications lodged and dispute notifications filed. It decided that the parties and interveners should put their submissions in writing and requested that attention be directed to the following matters:

"1. Having regard to section 90 of the Industrial Relations Act 1988 - and particularly to its reference to the likely effects of decisions on inflation and employment - the Commission asks the parties and interveners to discuss:

_______________________________________________________________________________

(7)Print J4600, p.3 (8)Print H9100, p.14

(9)Print H9100, p.15

4 NATIONAL WAGE CASE APRIL 1991

In all cases, the analyses underlying the answers should be fully explained.

2. In its February 1989 Review decision the Commission stated, inter alia:

To what degree has this been implemented?

3. If the Accord Mark VI and agreements reached under that accord are to be adopted, what are the implications for the continued implementation of the August 1989 National Wage Case decision, particularly in respect of:

NATIONAL WAGE CASE APRIL 1991 5

4. The compatibility of the employers'/Governments'/ACTU's in-principle agreement and the MTIA/Metal Trades Federation of Unions (MTFU) agreement and an assessment of the effects of the differing approaches for the continued implementation of the August 1989 National Wage Case decision and on aggregate wage outcomes.

5. The extent of superannuation provisions in awards, both Federal and State, and the extent of compliance with those provisions.

6. Given the statement by the Full Bench in the August 1989 National Wage Case decision, viz:

what has been the experience on wages drift and, in particular, executive salaries (both private and public, e.g., Commonwealth Government business undertakings) since August 1989?

7. How do recent increases in executive salaries (both private and public) compare with increases in wages under:

Dates were set for the receipt of the written submissions and the parties and interveners were given the opportunity to give oral outlines of them on 5, 13 and 21 December 1990. The Commission then reduced to writing a number of questions. These were distributed to all parties and interveners on 14 January 1991 and answers by 4 February 1991 were requested. The Commission relisted the case for the purpose of hearing final addresses on 21 February 1991.

It should be noted that on 3 December 1990 the Meat and Allied Trades Federation of Australia (MATFA) argued that the proceedings should not continue because of substantial industrial action by the Australasian Meat Industry Employees Union (AMIEU) and its members in Victoria and Queensland in support of the ACTU/Commonwealth Government agreement (Accord Mark VI) and other demands. In response to this submission, the Commission said, among other things:

_______________________________________________________________________________

(10)unreported

6 NATIONAL WAGE CASE APRIL 1991

"Matters involving that industrial action have been the subject of separate proceedings before the meat industry panel of the Commission and we are advised by the leader of that panel that as of today, there is no industrial action current in relation to the Accord Mark VI. In these circumstances, we are not prepared to adjourn these proceedings.

The situation raised in relation to the meat industry raises a broader issue of concern. The industrial action in the meat industry has been in breach of ACTU/AMIEU assurances given to the Commission in the meat industry inquiry proceedings, and has been in breach of the AMIEU's no extra claims commitment. There have also been instances in other industries in recent months where industrial action has occurred in support of union claims for the ACTU/Commonwealth Government Accord Mark VI. In some cases, unions have indicated that their industrial action has been supported by the ACTU.

Any continuation of such action can only raise serious doubts in our minds as to the bona fides of elements of the trade union movement in the commitments they have made or purported to make.

The Commission has made its position clear in relation to the no extra claims commitment. We would further make it clear that there can be no justification for industrial action during these proceedings in support of issues raised in these proceedings."(11)

On 13 December 1990, the MATFA renewed its application for an adjournment of the proceedings due to further industrial action by the AMIEU. In response, the Commission stated:

"We are concerned at the damage that has been done to the Australian economy by the industrial action in the meat industry and by the fact that the action continued notwithstanding our statement of 3 December. We are also concerned at the support the AMIEU action has been given by decisions of the ACTU.

As we said in our statement of 3 December, any continuation of such action can only raise serious doubts in our minds as to the bona fides of elements of the trade union movement in the commitments they have made or purport to make. This factor will be of vital importance to the deliberations of this Commission on the merits of the proceedings before us.

Having regard to the ACTU statement that no further action is planned, the current proceedings before Deputy President Riordan and other action foreshadowed by MATFA, we are not prepared to adjourn these proceedings. However, consistent with the decision of this Commission in the August 1988 National Wage Case relating to the PKIU, the meat industry union will be excluded from the results of this national wage case. If any claim is made by the union subsequent to these proceedings that claim will be dealt with by this Full Bench."(12)

_______________________________________________________________________________

(11)transcript, p.20 (12)transcript, pp. 61 - 62

NATIONAL WAGE CASE APRIL 1991 7

THE CLAIMS

Five formal applications to vary, three from employer organisations and two from a union, are before the Commission. The first two employer applications - made by the Metal Trades Industry Association of Australia (MTIA) - result from an agreement between that organisation and the unions, members of the Metal Trades Federation of Unions (MTFU). It seeks to vary the Metal Industry Award 1984 - Part I and the Metal Industry (Superannuation) Award 1989, respectively, to provide for a general wage increase of $12.00 per week to be payable from a date to be determined by the Commission; to provide a structured approach to enterprise bargaining and the payment of increases, on an individual enterprise basis and with the approval of the Commission, in instalments of 2.5 per cent not before 1 April 1991 and two per cent not before 1 August 1991; and an increase of one per cent superannuation contribution payable under the Metal Industry (Superannuation) Award 1989 from a date to be fixed by the Commission.

The third employer application - by the Australian Road Transport Industrial Organization (ARTIO) - seeks variation of the Transport Workers Award, 1983 by increasing minimum classification rates and supplementary payments "by the relevant percentage increase to the consumer price index (CPI) for the September Quarter 1990".

Union claims were included in applications by The Federated Millers' and Manufacturing Grocers' Employees' Association of Australasia to vary the Manufacturing Grocers Award 1985 and the Milling Industry Award 1990. In the proceedings, the ACTU sought a flat increase of $12.00 per week for all workers from 16 May 1991. It submitted that the increase should be available from the common date on the basis of a continuing commitment to structural efficiency. In addition the ACTU sought the capacity for enterprise bargaining for minimum rate awards based on productivity and profitability and increases in paid rates awards to be based on the Paid Rates Review Agreement.

Both union applications also sought the ratification of agreements which provide for an additional three per cent superannuation contribution with effect no earlier than 1 May 1991. In the alternative, one application claimed increases by arbitration to provide an additional 1.5 per cent contribution no later than 1 May 1992, plus a further 1.5 per cent no later than 1 May 1993; the other claimed increases of one per cent of ordinary time earnings from 1 July 1991, 1 May 1992 and 1 May 1993. The ACTU pressed the latter of the alternative claims in these proceedings.

The ACTU claims were said to be consistent with the Accord Mark VI reached on 21 February 1990 and revised on 20 November 1990. The revision resulted in tax cuts operating from 1 January 1991 to offset a CPI result of 0.7 per cent in the September 1990 quarter, in lieu of a wage claim based on that CPI outcome. The revised agreement and its elements were said to be consistent with wages growth of 6.25 per cent for 1990/91.

The ACTU claims were generally supported by the Commonwealth Government and the Governments of Victoria, Western Australia, South Australia, Tasmania and Queensland. The Government of Tasmania sought a date late in June 1991 for the $12.00 claim and the absorption of the three per cent occupational superannuation where an employer's contribution is currently six per cent or more, and proposed that the first superannuation increase be delayed until at least January 1992. The Queensland Government also supported the ACTU claim but submitted that the date of the $12.00 increase should be determined by the

8 NATIONAL WAGE CASE APRIL 1991

Commission. The Western Australian Government supported the phasing-in of increases in occupational superannuation over a two year period but not necessarily the specific dates proposed by the ACTU.

The CAI opposed the $12.00 per week across the board increase. It argued that the Commission should defer consideration of the claim until closer to the date sought by the ACTU to enable a decision to be based on more up-to-date economic information. If deferral were rejected, then it favoured at some point in time a modest percentage increase, based on achieved productivity, up to approximately half of the equivalent of $12.00 per week.

The Governments of Northern Territory and the Australian Capital Territory asked that the Commission defer consideration of the $12.00 claim until further economic data became available. The ACM, Australian Chamber of Commerce (ACC), Australian Bankers' Association (ABA), National Farmers' Federation (NFF) and the Australian Wool Selling Brokers Employers Federation (AWSBEF) supported a deferral, although the NFF and AWSBEF generally opposed the $12.00 increase. The New South Wales Government argued for a total rejection of the $12.00 claim. The Business Council of Australia (BCA) opposed an across the board wage increase, supporting instead modest wage increases aimed at establishing a downward trend in inflation.

Most organisations expressed broad support for the ACTU claim for enterprise bargaining in minimum rate awards and its approach to paid rates awards. There was, however, a marked divergence of opinion as to how enterprise bargaining should proceed, the means by which increases would be available and how wage outcomes should be expressed. The Australian Federation of Business and Professional Women (AFBPW), though supporting other aspects of the ACTU claim, opposed the proposal for enterprise bargaining.

The CAI, ACM and BCA supported the convening by the Commonwealth Government of a national conference on superannuation. If such a conference were not to be held the CAI, ACM, ABA, the Tasmanian Government (although still supporting some increase in superannuation), the Australian Capital Territory Government and the Northern Territory Government, would support the Commission itself convening a conference on matters relating to award superannuation before determining the ACTU claim.

The ACTU insisted that its claims represented a total package which had to be adopted as a whole. We make no comment on this stated position other than to say that the claims have been considered in accordance with the obligations placed upon us by the Act. Registered organisations and other parties to federal awards also have obligations under that Act and under the awards of the Commission.

In this context, two other matters require comment.

The first concerns the "Accord Mark VI". The Commission had occasion in its June 1986 National Wage Case decision to comment on an earlier ACTU and Commonwealth Government agreement. It did so in these terms:

"We have also considered the terms of the ACTU/Commonwealth Agreement which figured so prominently in the proceedings before us and which we summarize later. Many employer parties, particularly CAI, regarded the ACTU/Commonwealth Agreement as an attack on the integrity of the Commission, undermining its stature and independence. This was denied by

NATIONAL WAGE CASE APRIL 1991 9

the ACTU and the Commonwealth, both submitting that the Commission should determine the matters before it on their merits, having regard to its statutory responsibilities. This we have done.

However, we should add that although the ACTU/Commonwealth Agreement expresses the attitude of the ACTU and the Commonwealth to wage fixation and the Commonwealth's approach to economic policy, it is of limited significance as an 'agreement' for our purposes because the employers are not party to it. Further, while the expectations created by the Agreement have not been critical to the decisions we have come to, it has not been possible for us to ignore them. It is regrettable that these expectations have been magnified in various ways - publicity emanating from the parties to the Agreement, the publication of government guidelines, agreements made between some employers and unions, media speculation and advice - all of which have made our task more difficult. It should be obvious that no matter how well-meaning the intention, if strong expectations are generated on a claim which the Commission later finds to lack sufficient merit, the potential is created for serious dissatisfaction and disputation."(13)

We readily acknowledge that the series of agreements between the ACTU and the Commonwealth Government in recent years have made contributions to aspects of industrial relations in Australia. Nevertheless, the foregoing comments were pertinent in the June 1986 National Wage Case and their thrust is of direct relevance to these proceedings. In particular, the publicity surrounding the Accord Mark VI from its inception, and the campaign for its implementation in a wide range of industries following the ACTU Executive Resolution of 22 August 1990, undoubtedly have generated expectations that the Commission will grant the claims. Those expectations would not have been lessened by the submissions of the ACTU and the Commonwealth Government in these proceedings.

Such expectations ignore the nature of these proceedings. Consistent with the Commission's statutory responsibilities, matters before it must be determined according to equity, good conscience and their substantial merits. It follows that all parties have the right to have their views considered.

The second issue is one of some public notoriety.

During proceedings in September 1990, which led to the instant proceedings, the Commission was informed that, because the ACTU had pressed certain views about the remuneration of members of the Commission, there had been a clear impression created amongst many trade union members and officials that the Commission may be biased against the ACTU.

Subsequently, the Commonwealth Government appointed a committee (chaired by Mr G. Gleeson, A.C.) to review the structure and remuneration of members of the Commission. The proceedings of the Gleeson Committee coincided with the major part of this National Wage Case and several parties and interveners, including the Commonwealth Government, CAI, ACM, MTIA and the ACTU, put views to that committee.

The Commission is concerned with its independence and integrity, as the submissions of its members to the Gleeson Committee and the Second Annual Report of the Commission make clear. It is our view that the public perception

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(13)Print G3600, p.3

10 NATIONAL WAGE CASE APRIL 1991

of that integrity and independence has been jeopardised by the manner of the recent actions of the Commonwealth Government and the ACTU. We are particularly concerned that the decision in this case may be perceived, wrongly, as a response to those actions.

The Commission has a duty to consider properly the merits of submissions put to it. It has performed that duty and will continue to do so. It has not been - nor will it be - influenced by the source of submissions made to it.

The ACTU tendered approximately 33 industry/enterprise agreements negotiated in the context of the Accord Mark VI, the purpose of these agreements being to support the ACTU claim in relation to key awards, particularly the enterprise bargaining aspect (or flexibility approach) of that claim. In the ACTU's words:

". . . it puts us in a position where we can go beyond concepts and generalities . . . in order that the Commission is provided with some practical understanding of the way in which the package would be implemented and can reach its decision in these proceedings on that basis."

All but one of the agreements support an across the board $12.00 per week increase. The agreements generally favour an operative date of mid 1991 or a date to be determined by the Commission. In regard to enterprise bargaining there is a wide variety of approaches, including in some cases the expression of a ceiling on monetary outcomes and ranging from an overaward approach to outcomes requiring ratification by the Commission.

Similarly, the agreements endorse a variety of outcomes as to superannuation, varying from the total ACTU claim to differing dates and amounts and - in the case of the MTIA and the MTFU - to a one per cent increase from a date to be fixed by the Commission.

We have considered the agreements in detail. We have already noted that there is a variety of approaches and outcomes. In the ACTU's view these agreements lend support to its claims. On a careful reading of them we are satisfied that some do not.

THE ECONOMY

Section 90 of the Act requires the Commission, in the performance of its functions, to take into account the public interest. In doing so, it must have regard to "the state of the national economy and the likely effects on the national economy of any award or order that the Commission is considering, or is proposing to make, with special reference to likely effects on the level of employment and on inflation". This requirement - though always to be observed - assumes added significance in National Wage Cases. It is to be noted that the Act accords particular importance to employment and inflation.

The principal arguments adduced in this case which were intended to suggest that the Commission would be economically responsible if it sanctioned increases in labour costs (whether as wages or as superannuation contributions) were as follows:

. on a long-term view, the regime of wage policy which has obtained since 1983 has enhanced the performance of the economy. Granting

NATIONAL WAGE CASE APRIL 1991 11

the present applications would sustain that policy and would achieve further benefits in terms of increased productivity;

. wage policy has already subjected wage earners to a substantial loss of real wages. This should be taken into account before imposing further burdens in pursuit of macro-economic goals; and

. the labour cost increases inherent in the present application do no more than match the current rate of inflation and are consistent with a future winding-down of the inflation rate.

Contrary arguments were:

. the wage restraint of the post-1983 period facilitated a large increase in employment and a reduction of unemployment. A consideration of "sacrifices" borne by wage earners should be tempered by a recognition of the benefits conferred on those who were enabled to get work;

. in important respects, Australia's macro-economic performance has for some years been poor. The foreign debt and the balance of payments are major problems; inflation rates have been persistently high by world standards; and Australia's productivity performance has been deplorable. Until there is a long-term correction of these problems, the aspiration of unions for progress in real wages is unrealistic and unreasonable; and

. Australia is now undergoing a severe recession, brought about by the Federal Government's endeavours to rectify the problems of the external account. The likely depth and duration of this recession are the subject of differing views; but the present is an inopportune time to impose on industry the burden of increased labour costs;

. the rural sector is currently in a state of crisis and will have great difficulty in coping with increases in labour costs.

In assessing these arguments and determining the weight to be accorded them, we must have regard to matters of equity and industrial realism; and we must consider the medium and longer term consequences of our decisions, as well as short-term constraints. Moreover, wage policy cannot alone bear the burden of economic adjustment. Macro-economic adjustment also involves fiscal and monetary policies. Unsatisfactory macro-economic conditions may arise from deficiencies in these other areas of policy; or it may be that the economic forces, with which fiscal monetary and wage policies contend, defy the best efforts to control them. Micro-economic reform, of its very nature, entails a wide array of policy measures. Changes to industrial relations and award fixation are part of the array, but to regard them as the dominant part of it and to neglect the necessity for other reforms is to make assumptions which are unsupported by evidence and to court policy failure.

The Australian Conciliation and Arbitration Commission, in its decision of August 1988, said:

"The principal benefits of wage restraint are a lesser rate of inflation, a higher level of economic activity (with more employment and less unemployment), more investment, more rapid economic growth and less

12 NATIONAL WAGE CASE APRIL 1991

difficulty in adjusting the domestic economy to external constraints. Each of these benefits may be pursued by other means. Wage restraint, however, has the unique feature of promoting them all simultaneously. The cost of wage restraint, in the short term, is a less favourable outcome for real wages."(14)

In its August 1989 National Wage Case decision, this Commission said:

"Given the excessive level of imports, a fall-off in the level of export growth, the deterioration in the current account, a serious and continual deterioration in the balance of payments, the level of international debt, high interest rates, and renewed concerns about inflation, there are substantial economic grounds for rejecting any notion of wage increases at the present time.

There are however many interrelated elements involved in the work environment and economic considerations cannot be taken in isolation. . . . Ultimately the test is not the pursuit of what is perfect in the abstract, but what is the best outcome which is workable and sustainable immediately and over the medium and longer term."(15)

The Commission also said:

"Micro-economic adjustments and wage reform in particular are medium to longer term options which cannot be expected to provide a substitute for alternative macro-economic policy options. Nevertheless it is also apparent that continued efficiencies and improvements in labour flexibility as well as ongoing wage restraint will remain necessary. The structural efficiency principle will maintain the process started in 1987 but it is clearly not the only answer to Australia's international economic difficulties."(16)

These comments remain apposite. It is of the utmost importance to keep in view the policy which the Commission and its forebear, with extensive support from industrial parties, has been pursuing since 1987. This has linked the granting of wage increases to the adoption by employers and unions of measures calculated to raise efficiency and productivity and to reduce costs. That aspect of wage policy - the benefits of which can only be realised over time - must be continued.

Despite the uncertainties which surround all attempts to explain economic events and processes, we are reasonably convinced that the National Wage Case decisions of the period since 1983 and the parties' acceptance of them:

. moderated wage outcomes significantly by comparison with what might have been anticipated for the circumstances of the times;

. reduced the risk of wage explosions at times of economic expansion;

. tended to hold down the level of real wages;

. contributed materially to an enhancement of profit shares of income generated in the economy;

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(14)Print H4000, p.42 (15)Print H9100, p.5

(16)Print H9100, p.5

NATIONAL WAGE CASE APRIL 1991 13

. encouraged investment; and

. by reason of the foregoing effects, was one cause of the very great increase in employment (with associated reductions of unemployment) which occurred over the period 1983-90.

Our perception that wage policy has lowered the growth of labour costs finds support in an econometric study by Chapman and Gruen, which was tendered by the ACTU.(17) The beneficial effects on employment are confirmed by a Commonwealth Government exhibit summarising various studies of the effects of real wages on employment. They are also discussed by the Commonwealth Treasury in a 1990-91 budget paper.(18) The Treasury states that "the dominant reason for Australia's strong employment performance since the 1982-83 recession would appear to be real wage restraint [which] has underpinned the rapid increase in both labour demand and - through the 'encouraged worker' effect - labour supply". The Treasury considers that further reductions in real wages are unlikely, so that "a given rate of output growth in the period ahead is likely to result in a slower rate of employment growth than was the case for most of the 1980s". Reductions in structural and frictional unemployment would facilitate the reduction of the unemployment rate without aggravating wage and price inflation. A more flexible wage determination system, allowing enterprises to alter working patterns and arrangements, was among the potential sources of improved productivity and the better matching of labour demand and supply. The Treasury adds the following caution:

"However, the move to more flexible wage determination arrangements contains risks as well as opportunities. The main risk is that of excessive aggregate wage growth. Should that prove to be the case, one of the main lessons of the 1980s - namely, that wage restraint is fundamental to maintaining high levels of employment - will have been forgotten."

We agree that the capacity to avert excessive growth of the nominal and real wage levels is an important criterion for judging any proposed wages system.

Inflation has persisted in spite of wage restraint. For example, the annual percentage rates of increase of selected price indices in the period from 1984-85 to the fourth quarter of 1990 were as follows:

Per cent

Award rates of pay: adult persons 5.1

Average weekly earnings: persons 6.3

Consumer Price Index 7.9

Articles produced by manufacturers 6.7

Materials used in housebuilding 7.4

Implicit deflators

Gross domestic product 6.8

Domestic demand 6.9

Exports of goods and services 3.6

Imports of goods and services 4.0

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(17)Bruce J. Chapman and Fred Gruen, "An Analysis on the Australian Consensual

Incomes Accord", Discussion Paper No. 221, The Australian National

University Centre for Economic Policy Research, January 1990

(18)Budget Speech and Statements 1 and 2 of Budget Paper No. 1 1990-91,

Statement 2, pp. 2.37, 2.38

14 NATIONAL WAGE CASE APRIL 1991

These statistics imply a reduction of the real value of award rates by 2.6 per cent per annum; a reduction of that real value of average weekly earnings by 1.5 per cent per annum; and an annual earnings deficit of 1.1 per cent.

Theoretically, an even more restrained wage policy might have reduced the domestic rate of inflation. Having regard to the behaviour of real wages, however, we doubt that the growth rate of award wages could realistically have been less. Our understanding of recent experience is:

. that a significant source of inflation has been the recovery of profit margins from the low levels to which they were previously depressed - partially as a result of the wage "explosions" of 1973-74 and 1981-82;

. that the pressure for prices to rise was increased by expanding levels of demand; and

. that the economy has been afflicted with inflationary expectations which retard the movement to lesser inflation rates.

At the time of this decision, there are signs of a deceleration of inflation. If this occurs, it will be important to sustain it by encouraging the revision of expectations. Wage policy is relevant to that objective.

There is a widespread concern about Australia's external account, focusing on the current account deficit and the level of foreign debt. Parties and interveners were virtually unanimous that the deficit and the debt are serious problems. The Commonwealth Government's policies, as well as the opinions expressed in its submission, clearly evidence a judgement that the reduction of the current account deficit and the foreign debt are an important policy goal. A wage policy which contributes to the reduction of inflation will, in our view, assist in the adjustment of the external account. It will, for example, reduce the need for currency depreciation to preserve the competitiveness of Australian industries. We are not persuaded, however, that wage policy is a primary instrument of external adjustment.

This is not to deny that the capacity of the economy to afford wage and salary earners high and rising standards of living is affected by Australia's performance in international trade. The interdependence of this country's economic structure with the structures of other countries needs no emphasis. We discuss below the problems of rural industries, which are due principally to a lessening of external demand for their products. The international economic outlook is replete with uncertainties. The cessation of the war in the Middle East may alleviate inflationary pressures which would affect Australia both because of the direct impact upon the prices of traded goods and because of economic restraints imposed in other countries. It is unclear whether recessions elsewhere (for example, in the United States and the United Kingdom) have much further to go. In the medium and longer term, Australia as a debtor nation will be affected significantly by the cost of capital, which is internationally mobile. The restoration of the economies of Eastern Europe, the rebuilding of infrastructure in the Middle East and the effects the ageing of populations on savings are reasons to expect that the real cost of capital will remain high. Concerns such as these reinforce a conviction that the current setting is one wherein caution is the appropriate attitude.

The submissions and answers to questions also contain much discussion of productivity. Among the issues raised by that discussion are:

NATIONAL WAGE CASE APRIL 1991 15

. how well or badly Australia's recent productivity compares with that of earlier periods and with the performances of other countries;

. the extent to which any deficiency in Australia's productivity record is explained by features of the labour market and industrial relations; and

. the potential for the Commission to accelerate productivity growth by its wage system.

A misleading impression is given if statistics of labour productivity alone are used to assess productivity performance. The rapid growth of employment which occurred in the period 1983-90 - facilitated by wage policy - tended to depress the productivity of labour and to raise the productivity of capital. Hence the low growth of labour productivity is not necessarily indicative of poor performance. Measures of multifactor productivity, wherein inputs of labour and capital are combined, entail formidable statistical complexities, which are discussed in an Occasional Paper of the Australian Bureau of Statistics (an exhibit in this case).(19) There is also room for disagreement about the sectors of the economy which ought to be excluded from productivity estimates on the ground that the measurement of output is related to the measurement of inputs. A range of opinions exists as to the "true view" of Australia's productivity record in the 1980s. No one suggests, however, that there is any basis for complacency. Productivity growth is by far the most important source of long-term improvement in the standard of living; and the objective of increasing it is widely supported by the parties and interveners in these proceedings.

It was an assumption of many of the submissions that Australia's productivity growth is obstructed by unsatisfactory workplace practices and industrial relations. Despite the emphasis with which this was sometimes asserted, no evidence was presented which would support any assessment of the relative importance of workplace arrangements and other factors affecting productivity growth, such as technological change, product design, markets, the education and training of the labour force and the quality of management. Reforms such as the Commission has sought to encourage since 1987 are conducive to greater productivity; but we do not know how large the effect will prove to be. Suggestions of a potential for major productivity growth in devolution of industrial relations to the workplace are grounded upon no firm evidence - at least, none that is before us. Steps to be taken at the enterprise level will - to an unknown degree - "unlock" some of the benefits offered by the post-1987 reforms. But it is important to eschew unwarranted expectations, both because they may engender mistaken policies and because of the ill-effects which might attend their eventual disappointment.

We turn from the medium-term relation of wage policy to the state of the economy and consider now the immediate outlook. The case has coincided with a severe recession. Among the many indicators of the recession are the following:

_______________________________________________________________________________

(19)C. Aspden, Estimates of Multifactor Productivity, Australia, ABS, Catalogue

No. 5233.0, August 1990

16 NATIONAL WAGE CASE APRIL 1991

. the national accounts show that gross national expenditure (seasonally adjusted and measured at constant prices) in the last quarter of 1990 was three per cent less than in the corresponding quarter of 1989 and 1.3 per cent less than in the previous quarter. (Because of an increase in export volumes and a reduction in import volumes, the gross domestic product was 0.6 per cent higher in both the yearly and quarterly comparisons, despite the fall in gross national expenditure.);

. full-time employment (trend estimate) reached a peak in July 1990 and by March 1991 was 179,600 (2.9 per cent) fewer. Total employment fell by 140,900 (1.8 per cent);

. the unemployment rate, which was 6.2 per cent (trend estimate) in March 1990, had risen by March 1991 to 8.9 per cent;

. the number of job vacancies (seasonally adjusted) fell from 65,200 in November 1989 to 35,400 in November 1990;

. average weekly overtime fell from 1.49 hours in November 1989 to 1.25 hours in November 1990;

. the turnover of retail and selected service establishments, in nominal terms (trend estimate), was 2.6 per cent higher in January 1991 than a year earlier. This increase was below the rate of inflation;

. registrations of new motor vehicles fell from a peak of 53,944 (trend estimate) in April 1990 to 43,553 in February 1991 - a reduction of 19.6 per cent;

. private new capital expenditure (constant prices) in the December quarter of 1990 was nine per cent less than in the corresponding quarter of 1989. Expenditure in the December quarter of 1990 (seasonally adjusted) was 11 per cent less than in the September quarter. In the December quarter, businesses reported expectations of new capital expenditure in the financial year 1991-92 which were 14 per cent less (in nominal terms) than corresponding estimates for 1990-91 reported in the December quarter of 1989;

. trend estimates of the value of buildings approved show a decline throughout 1990, but some increase in the first two months. The number of houses approved appears to have recovered slightly between September 1990 and February 1991, but approvals of all dwelling units have continued to fall.

We offer no forecasts of the depth of the recession or of the timing and strength of a recovery. Most parties and interveners were inclined to expect the commencement of a recovery in the latter half of 1991. It must be remembered that unemployment typically lags behind other indicators of the business cycle. If only for this reason, we are apprehensive of a further and significant growth of unemployment, which is already at an alarming level. Against such a background, it would be difficult to justify a labour cost increase if it were not directed toward the achievement of greater productivity and efficiency.

NATIONAL WAGE CASE APRIL 1991 17

Coinciding with the recession is a severe deterioration in the marketability of major primary products. According to the index of rural commodity prices published by the Reserve Bank, those prices increased at an average rate of 10.2 per cent per year between 1984-85 and 1988-89. In the next year they fell by 1.7 per cent. Between 1989-90 and February 1991, the reduction (expressed as an annual rate) was 25.0 per cent. Hence a relatively prosperous period for rural industries had given way to a decidedly adverse one. Much of the rural sector is now affected by a severe price/cost squeeze.

The NFF tendered a paper by J. Harris, M. Kirby and B. Fisher, officers of the Australian Bureau of Agricultural and Resource Economics (ABARE). They state:

"The downturn in world commodity prices will be particularly marked for rural products. ABARE's rural commodity price index is forecast to fall 24 per cent in SDR terms in 1990-91. Record or near record levels of world production are dominating the markets of several of Australia's major rural commodities, including wool, wheat, sugar and dairy products. In addition, increased export subsidies from the European Community and the United States have caused wheat and dairy prices to deteriorate substantially. On the other hand, beef and cotton world indicator prices are forecast to rise marginally in 1990-91 . . . Although the volume of rural production is forecast to rise by 2 per cent in 1990-91 and farmers are expected to make every effort to contain total costs, net income is expected to fall sharply. Aggregate net farm cash income is forecast to fall 38 per cent in 1990-91 following the three previous years of relatively higher levels. Wool, wheat, barley, sugar, horticulture and manufacturing milk producers are expected to suffer large drops in farm income. Cotton remains the best prospect in the short term, while beef and intensive meat enterprises are expected to perform well relative to others."

This analysis was made before the recent abandonment of the wool price support scheme. The authors predict that the rural sector will face "intense adjustment pressure" in the first half of the 1990s.

In a paper delivered at the same conference, four other officers of the ABARE - R. Chambers, N. Hull, J. Harris and S. Beare - state:

"Family farm incomes are expected to fall even further than farm cash operating surpluses between 1989-90 and 1990-91 because of the fixed cost of depreciation. Family farm incomes in 1990-91 for the broadacre industries are expected to be around a quarter of their level in 1989-90. Average family farm incomes in the sheep industry are expected to be negative in 1990-91."

These authors comment that "domestic macro-economic policies cannot be singled out as responsible for the current downturn [in the rural sector] - the main factor is the marked fall in world market prices for Australia's major rural products".

The state of rural industries is of concern both because of the hardships due directly to it and because of its impact on the rest of the economy. Moreover, the deterioration of world markets for primary produce exacerbates the current account deficit. In so far as governmental policy is directed to

18 NATIONAL WAGE CASE APRIL 1991

reducing or eliminating the deficit, the fall in rural incomes must tend to sustain restrictive policies (such as high interest rates). The problems of the rural sector can only impede the recovery from the present recession, even if the causes of the two phenomena are distinct from each other.

We have reached the following conclusions:

. the wage restraint achieved since 1983 has yielded important benefits. These should, so far as is possible, be preserved and extended;

. in considering any alteration of the wage fixing system, we should take carefully into account the attendant risks of the emergence of an excessive rate of increase of labour costs;

. the current unemployment rate and the serious deterioration of the unemployment position which has recently occurred must cause the Commission to minimise any increase in wages for which justification may otherwise be found to exist;

. the necessity for continued wage restraint is augmented by the goal of a lower inflation rate and the adverse experiences of the rural sector; and

. some modest increase in wages may nevertheless be justified by the implication for real wages of continuing inflation and, more importantly, the necessity of continuing the steps directed toward the achievement of greater efficiency and productivity.

STRUCTURAL EFFICIENCY PRINCIPLE

In the August 1988 National Wage Case decision, the Commission discontinued the restructuring and efficiency principle which had been established by the March 1987 National Wage Case decision. It said:

"The proper application of the restructuring and efficiency principle called for a positive approach by trade unions, their members, and individual workers and by employer organizations, their members and individual employers. In the Commission's experience some were inadequate for the task. Many others made positive efforts: the best not only derived benefits which produced immediate efficiency and productivity improvements but also laid the foundation for future improvement."(20)

It also said:

". . . any new wage system introduced should build on the steps already taken to encourage greater productivity and efficiency. Attention must now be directed toward the more fundamental, institutionalised elements that operate to reduce the potential for increased productivity and efficiency."(21)

_______________________________________________________________________________

(20)Print H4000, p.5 (21)Print H4000, p.5

NATIONAL WAGE CASE APRIL 1991 19

That decision prescribed the structural efficiency principle, the purpose of which was "to facilitate the type of fundamental review essential to ensure that existing award structures are relevant to modern competitive requirements of industry and are in the best interests of both management and workers".(22) It adopted as a necessary concomitant an approach for ensuring stable relationships between awards and their continuing relevance to industry.

The Commission, in February, March and April 1989, reviewed the results, to that point, of the new principle. It was during this review that the ACTU produced a "blueprint" for award restructuring which, it argued, would "facilitate major and sustainable award reform on a general basis, with a clear understanding of award relationships one to another and with the necessary level of control by the Commission". In summary, the ACTU argued that restructuring should involve three associated steps:

. raise the minimum rate in minimum rates awards to ensure that restructuring proceeded on an equitable basis;

. establish broadbanded skill levels across industry; and

. provide for upward mobility through the skill levels by education, training and service.

In its decision following that Review,(23) the Commission agreed that:

. many award classification structures did not meet the needs of industry or employees;

. where necessary, the number of classifications in an award should be reduced to provide clearly defined skill levels, broadbanding of functions and multi-skilling; and

. properly designed and accredited skill training processes were essential to support the structural efficiency principle and its aims.

The Commission also emphasised that successful implementation of these measures could and would be inhibited by irregularities in award rates of pay that had occurred over the decades. These irregularities had been exacerbated by the attitudes of the parties to awards, and particularly the attitudes of unions to absorption and changes in relativities. As the Commission pointed out:

"The result is there exist in federal awards widespread examples of the prescription of different rates of pay for employees performing the same work but this is only part of the problem. For too long there have existed inequitable relationships among various classifications of employees. That this situation exists can be traced to features of the industrial relations system such as different attitudes adopted in relation to the adjustment of minimum rates and paid rates awards; different attitudes taken to the inclusion of overaward elements in awards, be they minimum rates or paid rates awards; the inclusion of supplementary payments in some awards and not others; and the different attitudes taken to consent arrangements and arbitrated awards.

_______________________________________________________________________________

(22)Print H4000, p.6 (23)Print H8200

20 NATIONAL WAGE CASE APRIL 1991

There is a further dimension to the problem. Employers have introduced and will continue to introduce wage relativities both as between employees employed under the same award and employees covered by other awards in a particular establishment. These relativities can vary from workplace to workplace and may bear no resemblance to the relativities set in the award or awards concerned."(24)

The Commission noted that this situation had inevitably caused feelings of injustice leading to industrial disputation and "flow-on" settlements and:

". . . has also led to economically unsustainable general wage increases, particularly when attempts have been made to move away from a highly centralised system, which have severely affected the state of the national economy."(25)

The Commission concluded that this situation had to be corrected; otherwise continuing instability within and between awards would seriously reduce the effect of moves to modernise those awards. Consequently it determined that:

". . . minimum rates awards will be reviewed to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other minimum rates awards".(26)

The Commission stated in its August 1989 National Wage Case decision that its decision had to be read in conjunction with the August 1988 National Wage Case decision and the February 1989 Review decision. It also elaborated on what had been said in the February 1989 Review decision about the requirement to review relationships between classification rates and supplementary payments in minimum rates awards, stating:

". . . we have decided that the minimum classification rate to be established over time for a metal industry tradesperson and a building industry tradesperson should be $356.30 per week with a $50.70 per week supplementary payment. The minimum classification rate of $356.30 per week would reflect the final effect of the structural efficiency adjustment determined by this decision.

Minimum classification rates and supplementary payments for other classifications throughout awards should be set in individual cases in relation to these rates on the basis of relative skill, responsibility and the conditions under which the particular work is normally performed. The Commission will only approve relativities in a particular award when satisfied that they are consistent with the rates and relativities fixed for comparable classifications in other awards. Before that requirement can be satisfied clear definitions will have to be established."(27)

And:

"where the existing minimum classification rate in an award exceeds the minimum rate for that classification assessed in accordance with this _______________________________________________________________________________

(24)Print H8200, p.6 (25)Print H8200, p.7

(26)Print H8200, p.7 (27)Print H9100, p.12

NATIONAL WAGE CASE APRIL 1991 21

decision, the excess amount is to be prescribed in a separate clause: that amount will not be subject to adjustment."(28)

In that decision the Commission was not prepared to approve the specific wage relativities for certain key classifications proposed by the ACTU on behalf of the trade union movement. What it did, however, was to determine a range in which it considered it appropriate that the relativities for those classifications be set in individual cases; and this has occurred.

The Commission emphasised that it was essential for the proper fixation of rates in minimum rates awards and the implementation of the broader scope of the structural efficiency principle to be treated as a package. In this connection it reiterated what it had said in the February 1989 Review decision, namely, that there was no limitation on the agenda available for structural efficiency exercises: in doing so it expressed concern that conditions of employment had not been included in negotiations "as a matter of course". It also stated that many awards had scope for a "less prescriptive approach" and suggested a number of issues which might be considered.

The Commission in its August 1989 National Wage Case decision said that it would review the progress of both structural efficiency and minimum rates adjustment exercises in May 1990. As earlier stated, that review was conducted in conferences chaired by the President. The May Agreement noted, inter alia, that:

. the parties supported the structural efficiency process and considered it should be continued beyond the projected life of the system of which it was the key element;

. results to the time of review had been uneven, with areas of substantial progress and areas of unsatisfactory progress;

. emphasis had been placed on classification restructuring, training and associated issues: other areas had been addressed but with less emphasis;

. actual productivity improvement had been limited, although potential for such improvement existed;

. structural efficiency exercises had focused at the award level but the ultimate effects would have to be assessed at workplace level; and

. the agenda for change should be broad; and the process of change should be continued and accelerated, particularly at enterprise level.

These points, and others, were elaborated upon in submissions in the current proceedings. A number of parties presented detailed material intended as an indicative analysis of approaches followed and issues raised during the structural efficiency process. To a large extent this material supported the broad views, referred to above, which were agreed by the parties to the May Agreement. Data tendered by the Commonwealth Government indicated that _______________________________________________________________________________

(28)Print H9100, p.14

22 NATIONAL WAGE CASE APRIL 1991

structural efficiency negotiations had been occurring at different negotiating levels - industry, occupational and enterprise - and that a prime focus had been on award prescriptions "to establish the framework for change". It said that negotiating frameworks had been inserted in many awards often in the form of award modernisation or enterprise flexibility clauses.

The ACTU submitted that fundamental award reform has been completed to the degree that an enterprise focus is now warranted. That fundamental award reform has occurred and been completed is not the view of other parties.

The CAI produced survey material which suggested that the pace of change arising from structural efficiency has been slow and that greater potential for efficiency and productivity improvements exist particularly in the area of working hours, overtime, and the use of part-time and casual employees. In the CAI's view, union opposition is stronger in areas regarded by employers as the most important in terms of productivity and efficiency. This was supported by material from the BCA which suggested that the focus of change at the award level has been on regard to job classifications, multiskilling and training.

It is clear from the material before us that the results of restructuring to date have been uneven. In some areas substantial progress has been made, at least in terms of the framework at award level. In these areas, the stage is set for implementation of award changes at enterprise level. At the other end of the scale, there are areas where little progress has been made either in providing an appropriate framework at award level or in otherwise implementing the structural efficiency principle. In the case of the former, the efficacy of award variations have, generally, still to be tested properly at workplace level. In the case of the latter, more substantial change seems necessary at the award level before a concentrated effort can be made at the workplace level.

There are two aspects of the implementation of the structural efficiency principle and the minimum rates adjustment package which cause us grave concern.

The first - noted in the May Agreement - is that emphasis has been placed on classification restructuring, training and associated issues; other areas have been addressed but with less emphasis. Classification restructuring, training and associated issues are important to the lasting effectiveness of restructuring but must be accompanied by a proper examination of other and equally important measures to increase efficiency and productivity. We reiterate what the February 1989 Review decision said: there is no limitation on the agenda available for structural efficiency exercises.

Associated with this point is the fact that, even where parties have made substantial changes to their awards, there seems to have been little real impact at the enterprise level. This is inconsistent with the structural efficiency principle. It was not, and is not, contemplated that award change alone could achieve the purpose of the principle: that change must be applied as necessary at the workplace level in order to achieve real gain. This is true of award changes to classification structures and associated training issues; it is equally true for other award changes bearing on work requirements, patterns and arrangements.

NATIONAL WAGE CASE APRIL 1991 23

The second aspect is that notwithstanding that the prime focus of the parties, and particularly the unions, has been the restructuring of classifications, much remains to be achieved in this area. In particular, a significant number of minimum rates awards have not been reviewed "to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other minimum rates awards".(29) We re-emphasise that such a review is an essential prerequisite to establishing stable modernised awards. It remains a requirement. The Commonwealth Government acknowledged the crucial nature of this process in the current proceedings when it said:

"The third and fifth measures of the structural efficiency principle provide for the creation of appropriate relativities within awards and enterprises, and for the establishment of properly fixed minimum rates for classifications across awards . . .

These two measures, together with the minimum rates adjustment exercise, reflect the Commission's concern to establish appropriate and equitable wage relationships within and between awards and industries. This is a crucial facet of the restructuring process and is fundamental to the development of the new classification structures and rates."

Until that task has been completed, irregularities will remain in the award system. Indeed, they could well be aggravated because some irregularities have been corrected by the creation of new relativities - involving both increases and reductions in the minimum classification rate - but many have not. As was stated in the August 1989 National Wage Case decision:

"We cannot overemphasise the importance of successfully applying the structural efficiency principle and the minimum rates adjustment process. These exercises provide an opportunity for the parties to display the maturity required to overcome the wage instabilities with which the community is only too familiar. It also provides the opportunity to take an essential step towards institutional reform which is a prerequisite to a more flexible system of wage fixation."(30)

ENTERPRISE BARGAINING

Most of the parties and interveners supported the continuation of the structural efficiency process, but with a focus on the workplace rather than the award level. As the CAI put it:

". . . the next wage system must continue to place central emphasis on the need to reform industrial relations to improve productivity, efficiency and international competitiveness. The structural efficiency principle must continue to be the centrepiece of the wage system.

The employment relationship takes place in the workplace, it does not take place at the award level. The worth or otherwise of any reforms made at other levels must ultimately be assessed by reference to their effect in workplaces. The two award restructuring systems [1987 and 1989] focused on reforming industrial awards, an important and as yet uncompleted task, but did not focus sufficiently on workplace change."

_______________________________________________________________________________

(29)Print H8200, p.7 (30)Print H9100, p.14

24 NATIONAL WAGE CASE APRIL 1991

This is a view shared by the parties and interveners who support change in the Commission's approach to enterprise bargaining. They explicitly or implicitly see this change as a means of raising productivity and hence living standards. For example, the ACTU said:

"We submit that whilst award change will facilitate productivity/ efficiency improvement, the realisation of such benefits will come more fully as a result of enterprise change utilising the opportunity provided by recent and pending award change, rather than from award change per se."

The Commonwealth submitted that:

". . . improvements in national living standards (real household disposable incomes) will now be more dependent upon Australia's productivity performance. Ongoing micro-economic reform and continued use of the wages system to encourage productivity improvement are therefore fundamental to maximising future improvements in living standards."

The November Agreement which resulted from conferences of the parties indicates the following points of agreement:

. negotiations should focus on the implementation of the structural efficiency principle at the workplace;

. the Commission should establish a framework of general guidelines for enterprise/workplace negotiations. The guidelines should include the following stipulations:

. enterprise flexibility/award modernisation clauses should be used as the mechanism for negotiations; and

NATIONAL WAGE CASE APRIL 1991 25

. outcomes of negotiations may be incorporated in section 115 agreements or in enterprise/workplace specific paid rates awards, subject to the approval of the Commission. Outcomes will not be incorporated in minimum rates awards (subject to a disagreement as to whether or not supplementary payments may be varied between employers).

Despite the apparent breadth of agreement, there are in reality major divergences of opinion as to the practical application of the points of agreement. The November Agreement records various "disagreed matters" and our consideration of the proposals and submissions has revealed others. Moreover, parties have in some instances departed from their previously agreed positions.

The disagreed matters identified in the November Agreement are, in summary, as follows:

. the use of achieved profitability as a criterion for enterprise bargaining;

. the use of differential supplementary payments, for example, to reflect location, industry, individual employer or other circumstances;

. the consistent application of the criteria to all employees within an enterprise or workplace;

. whether the criteria should specifically provide that enterprise agreements should not detract from national standards, and the meaning and application of any such provision; and

. the means by which and manner in which trade union and award coverage and structures can and should be rationalised (so as to facilitate enterprise bargaining).

Areas wherein some parties and interveners have departed from the points of agreement and there is now disagreement about their application include:

. the desirability of the Commission's approving overaward payments as a vehicle for negotiated wage increases; and

. the use and the provisions of enterprise flexibility/award modernisation clauses as the mechanism for negotiation.

Other matters which appear to us to be the subject of disagreement include:

. the advisability of the Commission's specifying a limit to the wage increases available from enterprise bargaining;

. the role of unions in negotiations (for example, in non-union shops);

. the role of the Commission in "approving", "scrutinising" and "monitoring" negotiated wage increases;

. whether or not employers should give formal commitments that negotiated wage increases will not cause price increases or that overaward payments will not be increased except in accordance with the guidelines for enterprise bargaining;

26 NATIONAL WAGE CASE APRIL 1991

. the extent to which achieved increases in productivity or profits should be translated into wage increases (for example, whether enterprise bargain outcomes should be cost neutral); and

. the application of enterprise bargaining to employees of on-site contractors.

Views and proposals

In respect of the wage increases generated by enterprise bargaining, the ACTU envisages that they would be prescribed in section 115 agreements or in paid rates awards. In the area of minimum rates awards they would be passed on by overaward payments "or other analogous arrangements" which do not disturb minimum rates. The process and outcomes would be subject to principles laid down by the Commission. If the unions' claims were granted in their totality, the unions would enter into "no extra claims" commitments which would govern their conduct in enterprise bargaining. The ACTU did not fully articulate guidelines for enterprise bargaining, but indicated that:

. wage increases would be available for achieved increases in productivity and profitability;

. there should be no prescribed "ceiling" to the increases;

. the Commission should have a conciliatory but not an arbitral role; and

. the Commission would depend upon the parties' compliance with the guidelines and would exercise no control.

In contrast to this position, the ACTU supports - presumably as an "analogous arrangement" - the agreement of the MTIA and the MTFU wherein the available increases are subject to a specified ceiling, agreements to pay them would be recorded in an appendix to the award and the Commission's "scrutiny and endorsement" would be necessary.

The ACTU referred to the enterprise bargaining provisions in the Accord Mark VI. In most respects, these are consistent with the terms of the November Agreement. The Accord Mark VI, however, provides that "the increases shall be monitored by the parties and the IRC to ensure consistency with the aggregate wage outcome". [emphasis added]

The availability of wage increases for achieved increases in profitability, for which the ACTU argued, was one of the disagreed matters recorded in the November Agreement. On other acknowledged points of disagreement relevant to enterprise bargaining, the ACTU's position was:

. the criteria established should apply consistently to all employees within an enterprise or workplace;

. there should be no erosion of "national minimum standards" such as those for annual leave, leave loadings, working hours, superannuation and long service leave; and

. supplementary payments should not be used to reflect enterprise bargaining outcomes.

NATIONAL WAGE CASE APRIL 1991 27

In its final submission on 21 February, the ACTU also stated that, in its view (despite the November Agreement), enterprise bargaining need not proceed through award modernisation/enterprise flexibility clauses, although some of the criteria pertaining to these clauses should be applied to enterprise bargaining, namely, involvement of unions, prohibition of negative cost cutting/loss of income and genuine agreement of employees.

The Commonwealth Government generally supported the ACTU's position. It advocated flexibility in the form that negotiated benefits might take (including bonuses, profit-sharing and overaward increases). The Commonwealth said:

"The Commonwealth considers that the results of enterprise bargaining would most commonly be via overaward payments . . . In some areas, the parties may consider it necessary, in the light of circumstances peculiar to their own particular sector to include in the award their agreed guidelines for enterprise/workplace negotiations; the scope for additional increases from such negotiations; and a list of companies reaching agreements in a schedule. Such an approach has been followed in the agreement in the metals sector."

It also said:

". . . the Commonwealth supports the scope for claims based on achieved increases in profitability as well as productivity. It would be a matter for the parties in the particular industries or awards to determine the performance measure that is most appropriate and best meets their circumstances."

Unlike the ACTU, however, the Commonwealth Government takes the view that award modernisation or enterprise flexibility clauses are the appropriate mechanism for enterprise bargaining. It submitted that such clauses may require review to ensure that they adequately cater for enterprise bargaining. It pointed out that the November Agreement provides for all awards to contain award modernisation/enterprise flexibility clauses. As we note in our discussion of minimum rates, the Commonwealth Government and the ACTU also differ in their interpretation of "negative cost cutting" and "no loss of income".

Although the Governments of Victoria, Queensland, Western Australia, South Australia and Tasmania expressed broad support for the submissions of the Commonwealth Government, answers to questions given by Queensland and Tasmania suggested some significant qualifications. Both Governments supported a ceiling on enterprise bargaining outcomes. They considered that the recasting of union coverage and award structures should be taken into account in determining compliance with the structural efficiency principle and that such compliance should be required before proceeding to enterprise bargaining.

The CAI agreed that wage outcomes from enterprise bargaining might be incorporated in paid rate enterprise awards and section 115 agreements or take the form of overaward payments. It was reluctant, however, to be perceived as enthusiastic about the use of overaward payments. The CAI said:

28 NATIONAL WAGE CASE APRIL 1991

"The system proposed by CAI is not one based on overaward payments. The outcome of negotiations might take a variety of award forms and also might take the form of overaward payments."(31)

It hoped "that overaward arrangements would be relatively minor". Profitability should not be a criterion for enterprise negotiations. Enterprise flexibility clauses should be included in all awards; but existing clauses, which in the CAI's view are unduly restrictive, should be replaced with a new provision. This provision would place strong emphasis on consultation between employers and employees, without the requirement for prior union or Commission approval before any agreement reached could be implemented. The form of consultation with employees would not be specified by the Commission. The CAI opposed the imposition of restrictions related to "national standards" and "negative cost cutting/no loss of income". Enterprise flexibility criteria should be consistently applied, but this did not imply that all employees in an enterprise or at a workplace would share in a negotiated increase: only those who had contributed to achieved productivity increases should participate.

In reply to a question about the monitoring of negotiated increases, the CAI said that the November Agreement "places greater emphasis on self regulation, and this is necessarily the case given that it is not proposed that there be a requirement that all enterprise flexibility agreements be brought to the Commission for ratification". It continued:

"In these circumstances a process of Commission monitoring of general developments, as opposed to the ordinary circumstance of individual Commission members monitoring developments in particular awards, will assume particular importance. Such a review process might take the form of monthly private conferences before the President at which parties were given the opportunity to put submissions on developments in enterprise negotiations, perhaps combined with scheduling a formal national wage Bench hearing later in the year for review purposes. The conferences would examine not only aggregate amounts agreed, but also issues of willingness to comply with Commission guidelines for enterprise negotiations, attempts to generate wage rounds and impose uniformity, and other relevant matters. It should be made clear that, depending on the outcome of the conferences, procedures should exist for the national wage Bench to reconvene to hear applications to vary or end the wage system."

We note that section 115 agreements and variations to paid rates awards would necessarily come before the Commission. This being so, the CAI's emphasis on "monitoring of general developments" seems to imply a greater role for negotiated increases in overaward payments than might be inferred from its stated hope that overaward arrangements would be "relatively minor".

The ACM favours "the managed decentralisation of the industrial relations process towards both the industry and the enterprise level with acceptance that wage increases at those levels could, and will over time, replace general wage increases". In the ACM's view, "the Commission should be involved in assessing the overwhelming majority of outcomes (accepting that overaward arrangements, while undesirable, cannot be prevented)". The arbitral services of the Commission should be available to resolve disputes which arise in the course of enterprise bargaining. In the minimum rates area, this raises a question as to the form which an arbitrated increase might take. The ACM proposes that there _______________________________________________________________________________

(31)transcript, p.148

NATIONAL WAGE CASE APRIL 1991 29

be "enterprise supplementary payments". These would be specific to the enterprises or workplaces concerned and "be included in awards by way of an appendix which would specify the amount of the payment and any other relevant aspects of the agreement considered necessary by the Commission". Thus it appears that the ACM envisages the provision of enterprise related wage increases by section 115 agreements, variations to paid rates awards, enterprise supplementary payments and overaward payments - the last two applying to the minimum rates area.

The ACM opposes the use of profitability as a criterion in enterprise bargaining and arbitration related thereto, believing "that decisions as to how profitability shall be shared should rest with the responsible management of enterprises and should not be dealt with through the industrial relations process". The ACM considers that wage increases should be less than the achieved gains in productivity, but opposes the imposition of maxima, which "inhibit the potential to achieve change" and "can build up unrealistic expectations of a wage increase being available to all employees in the industry concerned". Wage increases arising from achieved increases in productivity "should apply only to those employees covered by awards who have participated in the changes giving rise to those improvements". There should be no limitation on the changes to working arrangements negotiable in enterprise bargaining. This is subject to the recognition that section 106 of the Act requires certain matters to be dealt with by Full Benches.

Like the ACTU, the ACM now considers that enterprise bargaining would be unduly restricted if it were required always to proceed through the award modernisation/enterprise flexibility mechanism.

The BCA submitted that the Commission's endorsement of enterprise bargaining should be preceded by a special review, to be conducted by a Full Bench. It said:

". . . there is also the risk that an unsustainably large economy wide increase will result from a sectional increase which, of itself, may be sustainable (or may not, particularly if it has been extracted through coercion). If we do not minimise those risks, then the potential benefits of a shift away from the national wage determination to industry and enterprise level determination will have been lost.

This immediately focuses attention on the need to have institutional arrangements which make the emerging wage setting process sustainable economically and industrially. Those institutional arrangements include the Commission and its role, the National Wage Case and its future role, and award, bargaining and union structures. A fundamental part of the shift in the process is to properly examine these issues.

The Council submits that the shift would be assisted if the Commission were to acknowledge the advisability of moving to award and bargaining arrangements on a truer, narrower industry sector, sub-sector, or enterprise basis, for which there is already a developing constituency, to take the policy decision to effect that shift and to take action designed to strengthen the constituency for change and to help change occur.

30 NATIONAL WAGE CASE APRIL 1991

The Council considers that once the policy decision is taken, the issue of how the change was to be effected should be the subject of proceedings before a Full Bench of this Commission. That review should be established as a result of the decision in this case, the findings of the Full Bench to strengthen the constituency for change and provide a basis for action and change within six months."

The BCA, notwithstanding these views, proposed an "enterprise bargaining framework" within its overall "wages policy framework". Its "preferred mechanism" is "a certified agreement which covers an individual workplace to the exclusion of any other award or agreement". An alternative - one which, in the BCA's view, would not have wide appeal - is a certified agreement superimposed on a minimum rates award. A third avenue is paid rates awards limited to single enterprises. A fourth is supplementary payments: "this option would allow for an individual enterprise agreement to specify a wage increase above the ceiling applying to minimum rates awards generally, to be recorded as a supplementary payment applying only to that enterprise". The BCA makes no reference to overaward payments as a vehicle for making available negotiated wage increases.

Referring to the question of "consistency of application" of increases negotiated at the enterprise level, the BCA does not support such a requirement "when its meaning is so vague or only known to the ACTU". Consistent with its views that the enterprise bargaining approach is about employers, unions and employees developing their own workplace cultures and practices and shaping their own destinies, the BCA submitted that the meaning and application of "consistency" should be left to the negotiators. The same principle applied to the enforcement of "national standards"; and, in any event, all agreements would come before the Commission, so that issues of fairness and adherence to standards could be specifically considered.

The MTIA said that it was "a reluctant party to the enterprise bargaining proposals arising out of the ACTU/Government Accord". The move was premature because of the incomplete state of award restructuring. Having been left with no choice but to accommodate enterprise bargaining, the MTIA had entered into arrangements which incorporated various desirable characteristics. By adopting such a model, the Commission could "predetermine the limit to which labour costs are sustainable given the state of the national economy and then . . . decide the mechanism by which they are distributed".

The MTIA opposed any form of enterprise bargaining which allowed for negotiated increases in overaward payments. It tendered an affidavit of Mr A.C. Evans, the MTIA's chief executive. Mr Evans' evidence was uncontested and no party or intervener sought to cross-examine him. He referred to the disputation about overaward payments which had occurred in the period 1960-81. Summarising part of his evidence, the MTIA said:

"On 18 December 1981, MTIA entered into an agreement with unions in the industry, which agreement incorporated a wage package which included an agreement that there would be no further claims by the unions during the period of the agreement.

This concept of no extra claims agreement was a novel and revolutionary concept to the industrial climate then existing and the immediate reduction in confrontation was so marked and the consequent benefits to all parties so evident that it was adopted by the then Conciliation and Arbitration Commission in its National Wage Case decision of September 1983. [Print F2900; (1983) 291 CAR 1]"

NATIONAL WAGE CASE APRIL 1991 31

MTIA considers that the form of enterprise bargaining proposed in the Accord Mark VI "would cause a reversion to the wide scale pattern of direct action and leap-frogging wage levels existing prior to 1982". It said that the metal trades unions shared its concern. All parties wished to avoid disruption of the progress being made in efficiency, productivity and structural adjustment by the restoration of a system of overaward claims.

Proposals made by ARTIO were designed not for all employers, but to meet the needs of its industry. They involved the payment of productivity related increases where agreements were achieved at the enterprise level and a recognition that not all employees would receive these payments. The amounts available would be limited to $10.00 or $13.95 (depending upon the employee's classification) and the increases would be paid in return for achieved improvements in "productivity/flexibility" or through award restructuring. ARTIO said that "an open-ended right to pursue productivity/flexibility makes sense in terms of 'why limit the potential', but in other respects is not indicative of a managed approach to this 'brave new world'". Negotiations would be subject to principles set down by the Commission. In ARTIO's view, "recognised national award standards such as annual leave, leave loading, 38 hour week, sick leave entitlements, should not be subject to reduction or improvement through enterprise/productivity agreements"; but "the methods of taking leave, working hours, etc. may be subject to such enterprise agreements". The negotiated increases, unlike those provided for in the MTIA/MTFU agreement, would take the form of overaward payments and would not be subject to the Commission's approval. This represents a change on the part of ARTIO from an earlier stated view that negotiated increases should be approved by the Commission and "attached to the award as a separate schedule for the enterprise concerned". The change, we were told, was "very deliberate":

"ARTIO is now convinced that the obligatory involvement of the Commission for all enterprise level negotiated increases is not only impracticable, but undesirable. It would be undesirable . . . because the effect of adding such increases to the award by way of schedules will result in increased wages pressure (by the union), for those who have not negotiated increases, to get some level of increase . . . Given the thrust of enterprise level negotiations is to achieve real productivity/ flexibility gains in exchange for the wage increases, this potential for wage flow on is unacceptable. The proposition is impracticable . . . because the numbers of such agreements which could (should) eventuate would be enormous, creating an administrative and Commission workload nightmare, not to mention the possible time delays and the industrial consequences of such delays at the enterprise level where agreements have been reached."

ARTIO's views about the likely effects of Commission involvement are in direct contrast with those strongly expressed by the MTIA.

ARTIO asked the Commission to approve a set of "guidelines for enterprise productivity/flexibility payments". We asked all parties and interveners to comment on them and to tell us whether such a model would be appropriate for other industries. The replies indicated a general opinion that, however suitable the ARTIO "principles" might be for the road transport industry, they were not transferable to other areas.

The NFF supported the introduction of enterprise bargaining on the basis that wage increases would be negotiated for achieved productivity gains and therefore cost-neutral; and they would not be provided by adding them to award rates (so as to avert the escalation of prices via rise and fall clauses).

32 NATIONAL WAGE CASE APRIL 1991

Agreements for increases should be dealt with either through section 115 or "notation as a schedule to awards without specific reference to rates, i.e., record company/employer name, address and date of agreement with transcript recording the details of agreement". The latter method appears to be similar to the procedure envisaged in the agreement between the MTIA and the MTFU.

The ABA stated its support for the November Agreement. It saw the terms relating to enterprise arrangements "as forming the basis of a simple framework covering approaches and understandings that will become a key element in our industrial relations system in the future". Beyond this, the ABA broadly endorsed the views of the BCA.

MATFA stated that the desire for an enterprise focus had "grown out of dissatisfaction with the formal centralised arrangements which characterise the conciliation and arbitration system in the sense of meeting contemporary needs". It perceived enterprise agreements as providing "more self-regulated industrial relations based on high levels of trust and a recognition that due effort in doing things differently or better should attain a proper reward". In MATFA's view, agreements should be scrutinised by the Commission. The Commission would inquire as to whether an agreement is unfair, harsh or unconscionable and would need to be satisfied that it is made without duress. An agreement which did not comply with wage fixation principles (other than those for enterprise bargaining) would not necessarily be rejected. Agreements must contain grievance handling procedures. Elsewhere in its submission, MATFA complained about the AMIEU's abuse of sections 112 and 115 of the Act, "which provide the formal mechanisms for enterprise bargaining". The union's style of enterprise bargaining "leads to increases in wages and other benefits regardless of the ability of individual companies to pay and without any improvement in efficiency and productivity" and involved the presentation of identical "agreements" to be adopted in different plants.

The ACC commends the Commission and its predecessor for moving away from "blanket centrally distributed wage rises/conditions". This had allowed a role for industry and enterprise bargaining. There was, however, a requirement for further progress toward "genuine industry or enterprise based bargaining between employers and employees resulting in common law labour contracts". The ACC did not deal with the various issues of definition and implementation to which such a viewpoint gives rise.

In the opinion of the New South Wales Government "no longer is the debate centred on whether an enterprise focus is appropriate or not, but how that enterprise focus is best achieved". It said:

"Over time we envisage more flexible arrangements being negotiated which are specific to the enterprise and which will be honoured by the employer and workers of that enterprise. This will be reflected in a greater preponderance of section 115 agreements and enterprise (paid rates) awards and a diminution in the impact of minimum rates awards."

The system proposed by the New South Wales Government involves a preference for structural efficiency arrangements to be negotiated at the enterprise level and incorporated in section 115 agreements. The Government believed, however, that the interim principles set out in the February 1989 Review decision had unduly inhibited the flexibility which section 115 afforded. It proposed different criteria which, it said, were consistent with the terms of the Industrial Arbitration (Enterprise Agreements) Bill (passed by the New South Wales Parliament in December 1990). We were urged to adopt the proposed criteria "on the grounds of comity at least". The Government

NATIONAL WAGE CASE APRIL 1991 33

suggested that if a section 115 agreement was not appropriate or achievable, the parties could enter into an enterprise award. This would be a paid rates award. Although generally made by consent, it might partially be arbitrated, either on introduction or subsequently. Parties covered by minimum rates awards who did not wish to adopt either of the two foregoing options would nevertheless have two methods of effecting negotiated wage increases:

. adding enterprise specific arrangements to the relevant awards; and

. negotiating enterprise specific overaward arrangements.

The latter would be subject to the Commission's being satisfied that the arrangements fell within the principles; and the arrangements would be in writing and signed by the parties.

The New South Wales Government considered it necessary for the Commission to set "some general limit on the increases available under the proposed principles". It did not suggest how the "general limit" would be determined.

The ACT Government considered that enterprise bargaining should be permitted. In the early stages, however, there should be supervision by the Commission "as employers and unions, and management and staff, develop the competence and confidence to bargain at the enterprise level". In fact, "the Commission should retain the role of certifying the outcomes of enterprise bargaining as in the public interest and consistent with the national wage fixing principles". There should be no double counting of productivity gains at the industry level achieved through structural efficiencies and "the benefit of structural efficiency changes, e.g., industry wide accreditation and career paths, should not be prejudiced by inappropriate deals at the enterprise level". A review of the experience of enterprise bargaining should be held in twelve months.

The Northern Territory Government did not express a definite position about the desirability of implementing enterprise bargaining. It said:

"The idea of wage increases being available at the enterprise level based on productivity/profitability is not in itself an unreasonable approach. However, it should be treated with extreme caution where there is no clear rationale, or process to identify how productivity/profitability is measured, or whether in fact it has already been 'paid out' in some other form, for example job creation/retention; lower prices for goods and services."

The Northern Territory Government further said that "given the vagueness of assessing and determining the distribution of productivity and profits, or even whether they should be distributed in the form of wage increases, particularly in the present economic climate, it is submitted that these issues be the subject of a special review under the auspices of the Commission". It was the Government's view that the present proceedings should be deferred until April 1991. The special review would occur in the interim.

The AFBPW expressed outright opposition to the enterprise bargaining proposals based on a concern that the position of women would be worsened by enterprise bargaining. We refer again to this matter in the context of our discussion of pay discrimination.

34 NATIONAL WAGE CASE APRIL 1991

It was the contention of the AWSBEF that enterprise bargaining should occur independently of the Commission. The Federation did not support the November Agreement. It said:

"The Commission has no business attempting to prescribe criteria for bargaining and could not prevent the parties from including any criteria of their choosing nor require the parties to apply any criteria they choose to ignore.

In short, the Commission cannot ensure that outcomes are consistent with such criteria and in any event should not attempt to do so."

Aggregate outcomes

Some of the submissions evinced a concern about the implications of the enterprise bargaining proposals for aggregate wage outcomes. We share this concern. It applies especially to the endorsement of a role for overaward payments in the minimum rates area; but the paid rates area would not be without problems - particularly if productivity or profit related increases could be negotiated as well as increases to match "the market". Clearly, there is a tension between the goal of managing wage developments for macro-economic purposes and the aspiration to devolve wage determination to a lower level.

We asked all parties and interveners whether there was a danger "that wage increases identified by employers and employees as being 'best' for those enterprises may aggregate across the economy to damaging amounts". The answers focused on the parties' views as to the principles which the Commission should prescribe for enterprise bargaining: compliance with these, it was suggested, would obviate the danger. There was disagreement as to whether or not the principles should include a defined limit on available wage increases: some parties and interveners saw this to be a desirable safeguard, but most did not. The Commonwealth Government's view was:

"The responsibility for ensuring that enterprise bargaining proceeds consistent with such guidelines will rest largely with the parties themselves . . . Unions pursuing claims inconsistent with these guidelines would be in breach of their no extra claims commitments. In addition, the ACTU shoulders a collective responsibility for ensuring that agreed aggregate wage outcomes are achieved, as with previous Accords."

The ACTU said:

"First, the flexibility component of the system we propose is in the context of a centralised wages system and principles, with clear criteria governing enterprise bargaining. Second, the trade union movement has given a commitment to a 6.25% aggregate wages outcome for 1990-91, has met similar commitments in the past notwithstanding the doubts of employers . . . and clearly understands the implications for the trade union movement generally of meeting its responsibility . . . Further the evidence of the agreements reached to date and brought to the Commission . . . provides no support for the view that the enterprise outcome will aggregate to damaging proportions."

The MTIA, on the other hand, said:

NATIONAL WAGE CASE APRIL 1991 35

"Except for the views of the BCA and NSW Government there is to be no limit on the amount of wage increase. The wage increases are to be in the form of overaward payments in those enterprises covered by minimum rates awards and it follows from this that the Commission will have no control over the outcomes.

It is difficult to understand how such a scheme could even be contemplated let alone endorsed by the Commission."

As noted earlier, the MTIA believed that the form of proposed enterprise bargaining, and its lack of controls, "would cause a reversion to the wide scale pattern of direct action and leap-frogging of wage levels existing prior to 1982".

This issue was also dealt with in the primary submission of the New South Wales Government:

"In enterprise negotiations, it must be assumed that, all other things being equal, the parties will be in the best position to determine the appropriate level of wage increase(s) to be paid, bearing in mind the improvements in productivity/efficiency agreed upon. However, given the incidence of comparative wage justice in the history of wage fixation in this country, the parlous economic situation in which we now find ourselves, and the need for a rational and orderly development of the wage fixation process, it is considered necessary that some general limit on the increases available under the proposed principles be set by the Commission."

The BCA proposal (to which we have previously referred) that there be a special review before the implementation of enterprise bargaining was related mainly to the risk of "an unsustainably large economy wide increase".

We doubt whether the risk of excessive wage outcomes could be made acceptably low by any principles relevant to the proposals now before us. Some of the parties and interveners have placed upon us the responsibility for devising principles; and some have proposed requirements which would involve the Commission in dealing with enterprise level outcomes to a degree which others find unacceptable. Unless the principles specified a limit or defined a relation between wage increases and achieved increases in productivity or profitability, it would be difficult to foresee the aggregate increase which would flow from them. We note that the notion of a limit is opposed by most parties and interveners. No party or intervener has suggested any rule for relating the amount of enterprise level wage increases to the achieved increases in productivity or profitability; nor, indeed, have the problems of measurement necessary for any such rule been resolved.

The ACTU's commitment to a 6.25 per cent outcome does not alleviate these difficulties. That increase involves a comparison between average wage levels in 1990-91 and those of 1989-90. Few of the effects of enterprise bargaining stemming from this decision would be apparent in the aggregate wage statistics for 1990-91. A commitment for 1991-92 would have been more pertinent, but none was offered. Moreover, the risk that excessive aggregate outcomes will emerge from enterprise level agreements has to be considered as an enduring one. It is likely to be particularly significant at times of economic expansion.

36 NATIONAL WAGE CASE APRIL 1991

Conclusions

The great majority of parties and interveners have made clear their wish that the structural efficiency principle be continued and developed - developed to the point where its main focus becomes the enterprise or the workplace. They hold the view - one with which we broadly agree - that award reforms have had little impact at many workplaces and that the potential for increased efficiency and productivity has yet to be realised.

"Enterprise bargaining" is the means proposed to effect a change of focus. The term may be relatively new in Australian industrial relations. The substance is not. Forms of enterprise bargaining are familiar to anyone with a practical knowledge of the formal and informal processes of industrial relations as they have operated over many years. In its simplest form, enterprise bargaining explains much of the growth of overaward payments which has occurred since the 1940s. These overaward payments have generally reflected "market" rather than efficiency and productivity considerations. Mr Evans' unchallenged affidavit describes some of this experience. Often the enterprise bargains have led to the excessive wage levels, the excessive improvements in conditions of employment and the restrictive work practices of which employers and others have subsequently complained. This type of situation can be illustrated by the experience of the Shepparton Preserving Company Limited.

The tribunals have, over many years, facilitated enterprise bargaining by registering or certifying agreements, making enterprise awards by consent and conciliating in disputes about overaward payments and other non-award matters. A very high proportion of paid rates awards are the outcome of bargaining. (The question whether this may be characterised as "enterprise" bargaining underlines one of the problems inherent in proposals for enterprise bargaining, namely, that of defining the enterprise. For example, it may be asked whether negotiations about terms of employment in the various public services fit within the concept.)

In more recent years, this Commission and its predecessor have tried to encourage a form of enterprise bargaining which is not of the simplistic kind typified by the overaward campaigns of the past. That is, they have fostered the approach that any benefits conceded by employers should be in return for improved efficiency. Productivity bargaining for the 38 hour week was one example; offsets for superannuation benefits another. Only patchy success attended these efforts. Enterprise bargaining was central to the restructuring and efficiency principle, introduced in 1987. It was discontinued by the August 1988 National Wage Case decision. The former Commission then said:

"Despite the degree of success achieved we are not satisfied that the principle in its present form and as understood and accepted by many parties should be continued. Because of the general approach adopted to its application, some parties have exhausted the usefulness of the principle and it would seem impractical to expect others, who have not yet been capable of applying the principle successfully, to repeat the process."(32)

_______________________________________________________________________________

(32)Print H4000, p.5

NATIONAL WAGE CASE APRIL 1991 37

Similarly, the structural efficiency principle, determined by the August 1989 National Wage Case decision, provided a process under which awards could be reformed. It was not intended that awards would be changed as if they existed in a vacuum: for the changes to be effective, they had to be implemented at the workplaces covered by the reformed awards. As the submissions in these proceedings have demonstrated, the structural efficiency principle has not yet been extensively implemented.

Despite the parties' and interveners' perception of enterprise bargaining as an extension of the structural efficiency principle, at least some of their proposals seem to entail a formalised reversion to the earlier and simplistic form. There would be bargaining about overaward payments to employees covered by minimum rates awards. Achieved increases in productivity would supposedly be a determinant of the negotiated wage increases, but this intention must be viewed in the context of:

. the contention of the ACTU and various governments that achieved increases in profitability should also justify overaward claims; and

. the dearth of proposals as to how achieved increases in productivity (or profitability) are to be measured and translated into wage increases.

Alongside the proposals for overaward bargaining in the minimum rates area is a proposal that wages prescribed in paid rates awards should be reviewed on the basis of market comparisons.

Successful enterprise bargaining, as the Commonwealth Government observed, requires "a whole new management and workplace culture". The Commission, doubting that such a culture has yet come into being, asked the parties and interveners whether it should proceed to sanction enterprise bargaining "in confidence that this receptive environment will actually exist". The majority of the responses were positive. The reasons included the following:

. the structural efficiency process had already developed the required culture to a significant degree;

. if the Commission sanctions enterprise bargaining, there may be initial problems, but the necessary culture will emerge as parties experience the new arrangements; and

. what is proposed is a process of managed decentralism: the continuing involvement of the Commission will be a safeguard against adverse developments.

The MTIA did not agree with the majority. It said:

"MTIA does not believe that a receptive environment exists for a system of enterprise bargaining based on overaward payments. The Commonwealth is right. A whole new management and workplace culture is required. But it does not exist."

38 NATIONAL WAGE CASE APRIL 1991

As stated earlier in this decision, the MTIA believed that the form of enterprise bargaining proposed, and its lack of controls, "would cause a reversion to the wide scale pattern of direct action and leap-frogging of wage levels existing prior to 1982". The MTIA agreement with the MTFU, it was submitted, attempts to overcome these difficulties by means of a more structured approach to enterprise bargaining. As the MTIA admitted, however, it was "a reluctant party to the enterprise bargaining proposals arising out of the ACTU/Government Accord". The proposals, it felt, were premature because of the incomplete state of award restructuring.

The MTIA view, in our opinion, reflects current reality. The parties to industrial relations have still to develop the maturity necessary for the further shift of emphasis now proposed. We hope, however, that the structured approach to the implementation of the structural efficiency principle adopted in this decision will encourage the parties to assume more direct responsibility for industrial relations outcomes.

Our judgement that any other approach would be premature is much influenced by the fundamental disagreements between the parties and interveners about the nature of the system to be introduced. There is a distance between an acceptance of the proposition that enterprise bargaining has some potential to raise the level of workplace performance and the adoption of specific principles for enterprise bargaining. Our examination of the submissions made by those parties and interveners who support enterprise bargaining discloses that the level of agreement does not encompass many of the points with which principles would have to deal. As we have pointed out, there were major issues - such as the prescription of a ceiling on negotiated wage increases - which were not considered in the November Agreement. Moreover, there are now significant departures from the November Agreement, relating to the means of expressing outcomes in minimum rates awards and the reliance upon award modernisation and enterprise flexibility clauses in enterprise negotiations. The existence of a consensus has been pressed upon us as a factor which ought to influence our decision; but the consensus, in our view, is rather superficial.

It is evident, further, that the parties and interveners have concentrated their attention on the development of enterprise bargaining in the areas of employment covered by minimum rates awards. The Commission would be obliged to have regard to the implications of the proposals before it for paid rates awards and section 115 agreements. It is true, as we have noted previously, that some parties and interveners outlined proposals for all three areas; but it would be quite mistaken to suppose that parties and interveners in their discussions have jointly dealt with the wider questions. Thus the Commonwealth Government said:

"The Accord and the Joint Statement of Agreement arising from the September/October 1990 conferences leading up to this national wage review both make provision for parties to minimum rates awards to negotiate wage rises at the enterprise level based on achieved productivity/efficiency improvement. These matters were not discussed at the Paid Rates Review private conferences and thus specific attention to the implications of such negotiations for market reviews of paid rates awards was not given in the Paid Rates Joint Statement."

It went on to say:

NATIONAL WAGE CASE APRIL 1991 39

"Clearly, outcomes from enterprise negotiations will, over time, raise actual wage levels in particular sectors. Wage increases arising from that source are to be negotiated on the basis of changes involving improved productivity/profitability performance. In future, therefore, assessments of the market will need to pay due regard to this source of change in market rates. Not to do so would be inequitable if it opened the possibility of wage adjustments in paid rates awards where respondents have not also introduced measures to improve productivity. Accordingly, in the context of a wage system allowing for enterprise bargaining, parties to paid rates awards seeking to maintain market relevant rates for comparable classifications in minimum rates awards will also need to be able to demonstrate progress in improving productivity performance. Finally, it needs to be borne in mind that market rates information provides only a broad guide to the market and that judgement needs to be exercised in determining appropriate adjustments." This submission demonstrates the importance of the issues to be considered in applying principles for enterprise bargaining to the paid rates areas. A consensus about the minimum rates area - even if more than superficial - would need to be further developed so that serious anomalies in the paid rates area could be anticipated and averted.

In summary, we have major concerns about:

. the incompleteness of the award reform process and its application at the enterprise level;

. the inadequate development of the "receptive environment" necessary for the success of enterprise bargaining beyond the scope of the present system;

. the fundamental disagreements between the parties and interveners about the nature of the proposed forms of enterprise bargaining and their failure to deal with various significant issues; and

. the potential for excessive wage outcomes.

It is important that any decision to adopt a particular form of enterprise bargaining be taken with a justified expectation of the system's being durable. Fundamental deficiencies in the system would, in all probability, cause industrial disputation and excessive wage outcomes, leading to the system's collapse. There are many large unresolved issues requiring careful attention and further debate. Some - perhaps most - of those issues have been identified in the course of this decision; but there may well be others. The parties and interveners need to clarify their ideas and objectives. It would be inappropriate to endorse any new form of enterprise bargaining until that is done. That conclusion prejudges neither the advisability nor the form of a system which lies beyond the limits of the wage fixation principles determined in this decision.

There is one other matter which will need to be considered in a further review. This is the future role of National Wage Cases.

40 NATIONAL WAGE CASE APRIL 1991

The enterprise bargaining proposals challenge a long established principle of wage fixation in Australia, namely, that the benefits of increased productivity should be distributed on a national, rather than an industry or an enterprise, basis. We referred, in a question directed to all parties and interveners, to the two leading cases, namely, the General Motors-Holdens Case(33) of 1965-66 and the Engineering Oil Industry Case(34) of 1970, which affirm this principle. Some of the answers disputed that the proposals were, indeed, a departure from these decisions; but we have no doubt that they are. Others stressed the different circumstances and attitudes which now exist, especially because of the Commission's decisions since 1987. The MTIA, on the other hand, argued that the principles laid down in the General Motors-Holdens and Engineering Oil Industry Cases should not be abandoned on the basis of "cliches about 'the need for flexibility in the face of a continuously changing world' and the alleged community support for 'devolution of the responsibility for wage setting to the enterprise'".

It is an inevitable consequence of departing from the national distribution of productivity and relating wage increases to employee contributions in particular enterprises or workplaces that increases based on productivity will vary from enterprise to enterprise. The GMH and Oil Industry Cases were concerned with the potential inequities of such an outcome (among other things). We are, of course, not bound by the GMH and Oil Industry decisions. Our purpose in seeking the comments of the parties and interveners on those cases was to ensure that they considered specifically the reasons underlying them and the difficulties foreseen in an approach which would weaken the hold of national criteria in wage prescription. We readily acknowledge that changing attitudes and changing economic circumstances may justify the abandonment of previously-sanctioned principles; and also that experience may find such principles wanting. We are not convinced, however, that the parties and interveners have given adequate attention to the criteria for future wage increases other than those arising from enterprise bargaining.

The issues in National Wage Cases are wider than the distribution of productivity gains; but the foregoing discussion emphasises the need to delineate the scope, if any, for general wage increases and the scope for increases at the enterprise level.

The parties and the interveners will need to inform the Commission of their views to the future role, if any, of National Wage Cases and the criteria that should operate for sanctioning general wage increases within a system whereby increases are also negotiated at the enterprise level.

MINIMUM RATES AWARDS

The November Agreement included a number of agreed positions about minimum rates awards. Among these were:

. minimum rates awards should contain consistent minimum rates which bear an appropriate relationship with each other;

. any changes in minimum rates should be on work value grounds and work value claims should be dealt with on a co-ordinated basis;

_______________________________________________________________________________

(33)Print B1606; (1966) 115 CAR 931 (34)Print B5642; (1970) 134 CAR 159

NATIONAL WAGE CASE APRIL 1991 41

. supplementary payments should continue to be available in minimum rates awards according to principles established by the Commission;

. each award should contain an enterprise flexibility/award modernisation clause so that agreed variations in award conditions, working practices or arrangements may be implemented;

. enterprise flexibility/award modernisation clauses should allow for negotiation on arrangements for forms of performance related payments or on wage increases for achieved increases in productivity and efficiency;

. enterprise flexibility/award modernisation clauses should be used as the mechanism for negotiations; and

. in order to facilitate enterprise/workplace negotiations, single bargaining units are desirable.

A number of disagreed matters also were noted in the document. These included whether supplementary payments should vary on the basis of geographic location, industry, individual employer or some other basis.

We have already reiterated in this decision the requirement that minimum rates awards be reviewed "to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other awards". In this connection, we have considered in these proceedings submissions seeking the freezing of the minimum rates adjustment process pending a more favourable economic environment. We reject that approach for the very reasons underlying the introduction of the minimum rates adjustment process and the structural efficiency principle. These are discussed in the section of this decision entitled "structural efficiency principle". Instead we endorse the view of the parties in the May Agreement that:

"The cost impact of minimum rates adjustment can be addressed in the first instance through the provisions of the minimum rates adjustment principle including extended phasing in. Employers have the right to argue for exemptions or ultimately to avail themselves of the incapacity to pay principle."

However, in any such cases, the Commission and the award parties should ensure that at least that part of the minimum rates adjustment process which involves setting proper relativities for minimum classification rates is completed.

A further issue raised in relation to the implementation of the August 1989 National Wage Case decision was whether the structural efficiency adjustments should be applied to actual or award rates. The ACTU argued that they should be applied to actual rates; other parties and interveners argued that they should be applied to award rates.

The August 1989 National Wage Case decision, unlike the August 1988 National Wage Case decision, did not grant a percentage increase to all classifications. Instead, it prescribed money amount increases up to a particular classification level and a percentage increase above that level. In those circumstances, it would be inappropriate and inequitable to provide for indexation of overaward payments as a result of that decision. Consequently, we reject the ACTU submission. The increases available under the August 1989 National Wage Case decision are applicable to award rates of pay only.

42 NATIONAL WAGE CASE APRIL 1991

The ACTU argued that we should endorse specific rates for certain key classifications. As we have already noted, in its August 1989 National Wage Case decision, the Commission determined specific minimum classification rates and supplementary payments to be established over time for the building industry tradesperson and the metal industry tradesperson. It refrained from approving specific relativities for other key classifications but determined, on the material before it, ranges within which the relativities for those classifications should fall. It left the specific relativities to be set in individual cases and this has occurred. In view of this, there is no need for this Full Bench to endorse either those specific relativities or the resultant rates.

The ACTU also asked us to endorse for clerks the rates and relativities fixed by the Victorian Industrial Relations Commission for employees covered by the Victorian Commercial Clerks Award. The ACTU request was opposed strongly by employers. In the August 1989 National Wage Case decision, the Commission said about clerks:

"It will be noted that with the exception of the clerical classifications, we have indicated a range of relativities between the key tradespersons and the other classifications which were the subject of debate. The material available on clerical rates was inadequate to permit the establishment of a similar range of relativities. Furthermore, the ACTU proposed relativities for a number of other classifications in a range of industries, but these too were accompanied by insufficient material to permit any conclusions."(35)

In these proceedings also, the material available on clerical rates, functions and skills, was inadequate to permit the Commission to make a decision in favour of the ACTU argument. The weight to be accorded to the Victorian Commercial Clerks Award in relation to federal awards covering clerical employees will continue to be a matter for consideration in individual cases involving those federal awards.

We now also reaffirm the Commission's intention that minimum classification rates, once reviewed and fixed in an appropriate relationship, will not be moved from that relative position unless changes are warranted on work value grounds. The question whether work value claims should be considered on a co-ordinated basis is dealt with separately in the context of the work value principle.

Supplementary payments are an integral element in the minimum rates adjustment process and we consider that until that process is completed in current minimum rates awards - and the process is well short of completion - no general increases in award supplementary payments, other than as the result of a percentage increase awarded generally in a National Wage Case decision, should be available under the wage fixation principles of the Commission. The requirement that supplementary payments be prescribed in a separate award clause will continue. That clause will need to contain a definition making it clear that supplementary payments represent minimum payments in lieu of equivalent overaward payments.

_______________________________________________________________________________

(35)Print H9100, p.13

NATIONAL WAGE CASE APRIL 1991 43

We have already noted that the November Agreement raised as an issue the question whether supplementary payments should vary on the basis of geographic location, industry, individual employers or some other basis. It was the expectation of the August 1989 National Wage Case decision that supplementary payments might so vary. Nothing has been put in these proceedings to cause us to revise that expectation. This is a matter to be further considered after the completion of the minimum rates adjustment process.

The parties to the November Agreement agreed that each award should contain an enterprise flexibility/award modernisation clause; and that those clauses should be used as mechanisms for negotiation and change at enterprise level.

We agree that enterprise flexibility/award modernisation clauses can be a key element in the proper implementation of the structural efficiency principle and provide an effective mechanism for bringing about positive change at the workplace. They can also serve a necessary educative role for both management and workers. A number of awards have been varied to insert such clauses during the operation thus far of the structural efficiency principle. Many have not.

We are aware that there have been divergent views on the form, purpose and effect of these clauses expressed in other proceedings. These were reflected again in these proceedings notwithstanding the basic agreement noted above. Further, the ACTU resiled from the view that enterprise flexibility/award modernisation clauses should be used as mechanisms for negotiation and change at the enterprise level. However, it maintained its view that enterprise negotiations should still be subject to criteria which apply to enterprise flexibility/award modernisation clauses that already exist. The requirements are that:

. there be genuine agreement by employees;

. there be no loss of income, i.e. no negative cost cutting;

. there be no erosion of national standards; and

. the relevant unions be involved.

Employers have said that some of these criteria have caused problems and, indeed, been used to stifle change at enterprise level.

Award modernisation and enterprise flexibility clauses tend to have similar purposes and contain similar provisions. These clauses usually contain subclauses prescribing mechanisms for enterprise based negotiations. These prescriptions generally include:

. the establishment of a consultative process at the enterprise/ workplace level to focus the attention of management and employees on measures needed to improve efficiency; and

. a formal mechanism and criteria for enterprise agreements which require a change to an award provision. The requirements for these agreements often include:

44 NATIONAL WAGE CASE APRIL 1991

Facilitative provisions contained in an award may or may not be subject to the consultative procedures and/or the formal mechanisms, and criteria, for award change.

There have been misunderstandings about the role of award modernisation clauses, relating not only to their operation at the enterprise level but also to their operation vis-a-vis the award itself.

First, there seems to be a view that the matters subject to facilitative provisions in award clauses should be processed through the formal mechanism, including the criteria, provided by the award modernisation clause. In our view, this approach should not be followed. A facilitative provision is one which is built into an award provision and normally provides that the standard approach prescribed in that award provision may be departed from by agreement between an individual employer and an employee or the majority of employees in the plant or section concerned. Facilitative clauses are designed to provide, against the background of the standard or basic award clause, scope for flexibility to meet the particular working or competence requirements within an establishment. One illustration is the proviso to the following clause:

"An employer may close down his plant, or a section or sections thereof for a period of at least 21 consecutive days and grant the balance of the annual leave due to an employee in one continuous period in accordance with a roster.

Provided that by agreement with the majority of employees concerned, an employer may close down his plant for a period of at least fourteen consecutive days including non-working days and grant the balance of annual leave due to the employee by mutual arrangement."

It would be counterproductive to impose the formal mechanism, and criteria, of the award modernisation clause process on such provisions.

Secondly, there seems to be a view that an award modernisation clause may be used to negotiate a variation to a standard or basic award provision without the need to seek a formal award variation. This would be tantamount to providing a built-in contracting-out provision in an award, which should not occur. While an award system is provided for under the statutory framework, the parties to a particular award should not, in our view, be entitled to divest themselves of their obligations under it. If another or both should wish to change those obligations, they should seek to do so in accordance with the processes provided by the Act. Clearly, the relevant union or unions have a role in that process.

The CAI raised what it considered to be a particular problem caused by the different constructions being placed on the expression "negative cost cutting" used by the Commission in its August 1989 National Wage Case decision. It submitted that the Commission should not include any reference to negative cost cutting in its decision or the principles resulting from this case. In

NATIONAL WAGE CASE APRIL 1991 45

respect of the "no loss of income" criterion, currently appearing in award modernisation clauses, CAI suggested that the Commission should indicate that structural efficiency cannot be treated on a cost neutral basis and that it will involve losses and gains for both employers and employees.

The ACTU submitted that "negative cost cutting" should be treated as synonymous with "no loss of income". It said:

". . . the proper test is that no employee should earn less than they would have been entitled to under the pre-existing award provisions, plus any SEP increases, plus any broadbanding and minimum rate adjustment to which they are entitled (i.e., when not subject to absorption)."

It argued that the Commission should reinforce its previously expressed view ". . . to ensure that negative cost cutting approaches do not re-emerge in the implementation of restructuring at the enterprise level".

The MTIA and the MTFU have agreed, as part of their agreement presented in this case, that the "no loss of income" criterion in the Metal Industry Award 1984 - Part I means "no reduction in ordinary time earnings". MTIA interprets ordinary time earnings to mean the amount an employee would normally receive for performing 38 hours of ordinary work. This amount would not include overtime, penalty rates, disability allowances, shift allowances, special rates, fares and travelling time allowances and other ancillary payments of a like nature.

The Commonwealth Government submitted:

"Employers should approach the process with a mind to achieving working patterns and arrangements that will permit more efficient work organisation rather than focusing on ways to claw back [structural efficiency adjustments] through measures designed to cut employees' regular income. On the other hand, unions should be prepared to consider these issues in a constructive manner and not use negative cost cutting as an excuse to refuse to address them. In addition, negative cost cutting should not be extended to prevent measures which may lead, for example, to reduced overtime as a result of increased efficiencies, or in response to changed economic circumstances."

The term "negative cost cutting" arose as a result of what parties and the Commission saw as an unfortunate development in the implementation of the restructuring and efficiency principle: a balance sheet approach which led only too often to concentration on issues which, for the most part, could contribute only illusory gains. The Commission, in its August 1988 National Wage Case decision, saw that if such an approach were to be followed in the implementation of the structural efficiency principle, it would deflect attention from ". . . the more fundamental, institutionalised elements that operate to reduce the potential for increased productivity and efficiency".(36)

Implementation of the structural efficiency principle will involve what might be perceived as both losses and gains for employers and employees. The end, however, is that all will gain through the increased viability and efficiency of Australian industry. Given the support that the parties and interveners gave in the 1988 and 1989 National Wage Cases, and this case, to

_______________________________________________________________________________

(36)Print H4000, p.5

46 NATIONAL WAGE CASE APRIL 1991

continued efforts to increase productivity and efficiency, we would find it regrettable that the "negative cost cutting" term should be used by any party to prevent the achievement of the aim of the structural efficiency principle. To assist in removing any such obstacle in the future, we now make it clear that the Commission does not intend that any employee should lose any existing entitlement to earnings, award or overaward, for working ordinary hours of work as the result of any award changes made as part of the implementation of the structural efficiency principle.

In these proceedings, the CAI and other employers pressed strongly the issue of coverage of both awards and trade unions. They argued that rationalisation of coverage of awards and trade unions is not an objective to be pursued for its own sake but rather an important means of obtaining more appropriate working arrangements. They based their approach to award coverage on the premise that the industry and enterprise of the employer should be the focus of award coverage and structure and that a proliferation of awards applying to an industry or enterprise is an impediment to increased productivity and efficiency. The CAI proposed, as one method of achieving the necessary focus, the inclusion of broad majority clauses in occupational awards which span a number of different employer industries. It also contended that a multiplicity of unions in workplaces can seriously reduce the effectiveness of structural efficiency exercises. The Commission should aim to rationalise union coverage so as to eliminate barriers to efficiency, reduce the number of unions represented in a workplace or sector and move towards a situation where union coverage has a greater focus on the industry or enterprise of the employer.

The problem created by existing award and union coverage is illustrated by the position of the Brisbane City Council, which is respondent to 30 State awards and agreements and two federal awards. The position of the Brisbane City Council also highlighted the issue of State and federal award coverage at the enterprise level. The submission made on behalf of the Council proposed that joint sittings of federal and State tribunals or assignments to persons holding dual appointments, where that is practicable, are desirable so as to assist in the implementation of structural efficiency in enterprises subject to State and federal award coverage.

The CAI suggested that the Commission hold a formal review of union and award structures, establish principles for union and award coverage and emphasise that the reform of union and award structure and coverage remains part of the agenda for structural efficiency exercises.

Earlier National Wage Case decisions dealing with the structural efficiency principle have made it clear that issues of award and union coverage are proper matters to be dealt with under the principle. In the February 1989 Review decision, the Commission stated:

"It is true, however, that a number of matters raised by the employers such as those associated with the structure of the unions and the coverage of awards are of such a nature that major change may take time, notwithstanding the recognition of the need for change.

In particular, attitudes to union structures are deeply ingrained and much time and effort may be required for unions and employers to develop appropriate and acceptable mechanisms which will enable fundamental change to occur without grave industrial relations implications. However, there is no reason why immediate attention should

NATIONAL WAGE CASE APRIL 1991 47

not be given to those aspects of this issue which interfere with the creation of proper career structures and act as an impediment to multi-skilling and broadening of duties. Where warranted, change should be made."(37)

We maintain that position and do not consider it to be appropriate at this time to hold a formal review of union and award structures or attempt to prescribe principles relating to union and award coverage. Specific cases will continue to be treated on their merits.

We add one other point. In light of the Commission's experience with majority clauses in awards, we suggest that the parties should give consideration to inserting such clauses in awards. A majority clause is one which prescribes that where workers covered by a particular award in an individual establishment are in the minority, the conditions of employment prescribed in the award covering the majority of employees in that establishment shall apply. The parties should give particular attention to the practical implementation and application of such clauses having regard to, among other things, the ambit of the dispute upon which any proposed order is based and the results expected to follow from the adoption of a majority clause.

Finally, we make it clear that we favour co-operation between this Commission and the State tribunals in an attempt to attain better results for the structural efficiency principle. It is our belief that, to this end, all available sections of the various Acts of Parliament dealing with co-operation between tribunals should be used to the full.

We have already commented on:

. the disparate results to date in award restructuring;

. the limited progress to date in translating award restructuring to the workplace;

. the state of the economy;

. our doubts about the current preparedness of the parties, individual employers and their employees, to handle enterprise level negotiations, particularly in the forms proposed in these proceedings; and

. the important role which most of the parties and interveners envisage for award modernisation clauses.

After closely considering all of these points, we consider that if, as the parties wish, the structural efficiency principle is to be continued and extended, the appropriate course is for the Commission to determine that a structured approach should be applied to all minimum rates awards. We emphasise that such an approach should not be seen as a formula for mediocrity; a properly structured approach, together with a co-operative effort by award parties, can provide a positive thrust and accommodate different abilities and needs.

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(37)Print H8200, pp. 3 - 4

48 NATIONAL WAGE CASE APRIL 1991

We have therefore decided consistently with the ongoing implementation of structural efficiency, that wage increases in minimum rates awards will be subject to conditions. Any party to an award seeking the increases allowable under this decision must satisfy the Commission:

(a) that the parties to the award have examined or are examining both award and non-award matters to test whether work classifications and basic work patterns and arrangements are appropriate - the examination to include specific consideration of:

(b) that facilitative provisions have been inserted in relevant clauses of the award;

(c) that the award requires enterprises to establish a consultative mechanism and procedures appropriate to their size, structure and needs for consultation and negotiation on matters affecting their efficiency and productivity;

(d) that the award, in order to ensure increased efficiency and productivity at the enterprise level, while not limiting the rights of either an employer or union to arbitration, provides a process whereby consideration can be given to changes in award provisions; any agreement reached under this process would have to be formally ratified by the Commission and any disputed areas should be subject to conciliation and/or arbitration;

(e) that there is a provision in the award to the effect that an employer may direct an employee to carry out such duties as are within the limits of the employee's skill, competence and training;

(f) that the parties to the award have implemented, substantially, the structural efficiency principle determined in the 7 August 1989 National Wage Case decision and have applied or are applying consequential award reforms to the workplace; and

(g) that the parties to the award have commenced the minimum rates adjustment process or are prepared to commence it, in the acceptably near future.

No award will be varied to give effect to this decision unless and until it has been varied to provide the second structural efficiency adjustment allowable in accordance with the National Wage Case decision of 7 August 1989.

In its August 1989 National Wage Case decision the Commission said that, as far as is possible, changes under the structural efficiency principle should be introduced by agreement. We maintain that view. However, we should emphasise, because of our experience to date with the implementation of the structural efficiency principle, that the Commission will carefully examine agreements presented for its approval. Similarly, where no agreement exists, the Commission will exercise its conciliation and arbitration responsibilities

NATIONAL WAGE CASE APRIL 1991 49

to ensure that the requirements of this decision are met. Wage increases will not be available where employees or unions obstruct the changes for which we have called. Equally, however, we do not contemplate the refusal of increases where the employers obstruct or unreasonably delay those changes.

The approach which we have chosen will not only cause the parties to assess objectively their efforts to date but will focus the attention of management and employees on measures to improve efficiency and productivity at workplace level; it should also encourage an educative process which will be important in any future decentralisation of industrial relations to the workplace level. Properly applied, it may provide the basis for some movement towards a single bargaining unit in multi-union/award workplaces. For instance, a single consultative mechanism covering all employees in an enterprise would meet the individual requirements for a consultative mechanism. Further, if the separate awards operating in an establishment include similar facilitative provisions in their various clauses, they can be applied across the workforce of an enterprise rather than be confined to discrete award coverage areas within the enterprise.

PAID RATES AWARDS AND SECTION 115 AGREEMENTS

Previous decisions of the Commission have indicated concern with the practices and principles adopted for the making of paid rates awards. Since 1983, indeed, the Commission has required that no new paid rates awards be made except in special cases. Relevant decisions include the National Wage Case decisions of September 1983,(38) February 1989 and August 1989. Full Bench decisions in relation to the Australian Public Service(39) also contain discussion and conclusions important to the debate about the making and adjustment of paid rates awards.

In the 1983 National Wage Case decision the Commission said:

"The making of paid rates awards, particularly awards which cover many employers paying substantially different award amounts, exposes the system to unnecessary hazard. It would be wise for the duration of the new Principles to minimize any strain on the system. Accordingly, even though the CAI did not oppose the making of paid rates awards, we are of the view that the Commission should refrain from converting minimum rates awards in whole or in part into paid rates awards during the currency of the new Principles. This restriction will not apply to first awards of the Commission which are in the nature of paid rates awards provided the conditions for the making of first awards are complied with.

We would further encourage the conversion into a minimum rates award of a paid rates award which failed to maintain itself as a true paid rates award. The conversion of a lapsed paid rates award back into a minimum rates award would of course involve valuation of the classifications in it by comparison with similar classifications in other minimum rates awards."(40)

It also said:

_______________________________________________________________________________

(38)Print F2900 (39)Prints F7410, F7411 and F8692

(40)Print F2900, p.39

50 NATIONAL WAGE CASE APRIL 1991

". . . we have misgivings about the representativeness of market surveys as a basis of adjustment. There is a danger that in trying to establish an equitable base for the paid rates award under consideration, a series of inequitable bases may result elsewhere, opening up the prospects of leapfrogging despite the provision in the ACTU's proposed principle that there should be no flow-on. Notwithstanding wage movements during the wage indexation period from 1975 to 1981 and the general round of wage increases since that time, it must be recognized that the words of the Full Bench in the Potato Marketing Board Case still apply, namely, 'The relevant background against which the indexation principle was introduced contained an irregular pattern which no system of wage fixation could entirely reconcile' [Print C6985, p.2; (1976) 176 CAR 16 at 17].

Recognition of market surveys for certain paid rates awards would be one method of changing the irregular pattern of wage rates to establish what the ACTU contends is an equitable base but it may lead to the parties demanding, and the Commission granting, on equity grounds, an extension of the concept to other comparative wage justice or maintenance of relativity exercises for the same reason. In the result it is difficult to see how the Commission, in this case, could be assured that increases in wage rates outside National Wage Cases would be negligible."(41)

And further:

"Our second concern, which is in part related to the first, arises from the interaction of wage and salary rates within the public sectors, Federal and State, and between the public and private sectors. This is a complicated area which has given rise to leapfrogging in the past but which has not to our knowledge been fully investigated. Consideration of any claim for adjustment of paid rates awards to establish a firm and equitable base should involve a detailed examination of this problem."(42)

These concerns led to the Commission deciding in the August 1989 National Wage Case decision that a Full Bench should be constituted "for the purpose of hearing further argument about the future of paid rates awards".(43) The parties would be expected to address, inter alia, the following matters:

"(i) whether any new paid rates awards should be made;

(ii) whether the parties to existing paid rates awards, both in the private and public sectors, should be required within a given period to apply for cancellation of their existing paid rates awards and their replacement with agreements certified under s.115 of the Act;

(iii) the basis on which rates of pay in paid rates awards or s.115 agreements should be assessed;

_______________________________________________________________________________

(41)Print F2900, p.40 (42)Print F2900, p.40

(43)Print H9100, p.15

NATIONAL WAGE CASE APRIL 1991 51

(iv) whether paid rates awards or s.115 agreements should only be approved where they cover all workers in an establishment conducted by a single employer; and

(v) whether paid rates awards or s.115 agreements within an industry or industry sector should only be reviewed collectively so as to ensure proper attention is given to internal relativities."(44)

Further the Commission decided that:

"Pending the outcome of the foreshadowed Full Bench proceedings we have determined in relation to paid rates awards that:

. except in special cases, the Commission will not make new paid rates awards;

. it is no longer appropriate to apply the decision in the General Motors-Holden's Limited and Ford Australia Ltd Case, of awarding:

'an increase to restore to the rates under the awards the relationship which they had when established vis-a-vis rates actually paid for similar work in industries located near the establishments of these two companies.' [Print E7273; (1981) 260 CAR 3]

. rates in paid rates awards should not be fixed at a level which would affect the rates for other workers;

. paid rates awards or agreements should contain clear classification definitions;

. statutory declarations will be required from all parties involved to the effect that the integrity of those awards or agreements will be preserved;

. if breached, paid rates awards should be discontinued and appropriate minimum rates should be prescribed;

. no increase at the base rate which is greater than the structural efficiency adjustment will be allowed in a paid rates award; and

. subject to special cases, no special adjustment may be approved which cannot be justified on the basis of the creation of a proper career structure through structural efficiency.

An agreement which adopts paid rates, and in respect of which the parties seek certification under s.115 of the Act, will be subject to the foregoing requirements."(45)

In the result, a number of conferences were held between the major parties and interveners under the auspices of the Commission. These conferences achieved much common ground which is indicated in the Paid Rates Review Agreement. It is apparent from that document, from the submissions made

_______________________________________________________________________________

(44)Print H9100, p.15 (45)Print H9100, pp. 15 - 16

52 NATIONAL WAGE CASE APRIL 1991

in these proceedings and from answers to questions that the parties and interveners want to continue existing paid rates awards and to have the ability to make new paid rates awards.

Most parties and interveners seek a change to the Commission's existing principles. They desire greater flexibility and the devolution of responsibility to the employers, employees and unions directly concerned. They wish the principles to provide scope for taking into account:

. market rates;

. recruitment and retention considerations;

. payments based on performance; and

. incremental payments.

The Commission agrees with the concept of parties to paid rates awards having greater flexibility and more responsibility. However, we do continue to have serious reservations about how this should be achieved and when. There are various reasons for this. First, the principles in relation to paid rates awards have been abused in the past. Employers have continued to make overaward payments and over classification has occurred. Moreover, market factors have been wrongly taken into account. For instance, the current interim paid rates principle, which permitted increases beyond the standard increase (other than at the base and provided that they arose out of the adoption of appropriate and new classification structures), was used to provide increases to meet what were considered to be market pressures. Furthermore, we think that one factor contributing to the rise of performance pay proposals in paid rates awards is market pressures and that there is a danger that performance based pay arrangements might, in part, provide a further indirect mechanism for addressing "market realities".

Secondly, the parties and interveners in these proceedings submitted, consistently with the Paid Rates Review Agreement, that paid rates awards "should cover all important aspects of the employment relationship considered appropriate for award regulation". This begs the question of what constitutes "all important aspects". Presumably the term would cover wages and salaries, hours of work, penalty rates and various types of leave. Should it also include termination, change and redundancy provisions, superannuation provisions, remote area allowances and a multitude of other matters directly relevant to the contract of employment? If it should, then should the relevant provisions in a paid rates award reflect the Commission standards or should there be scope for exceeding Commission standards?

These are not idle questions. The parties and interveners also submitted, again consistently with the Paid Rates Review Agreement, that the "integrity of paid rates awards should be preserved". They said the Commission "may require from the parties commitments that they will maintain the integrity of the award". How can the integrity of a paid rates award be maintained if it is not in fact a paid rates award - if it excludes relevant elements of the contract of employment which, in turn, are presumably not covered by a "maintenance of integrity" requirement?

NATIONAL WAGE CASE APRIL 1991 53

Thirdly, it is important that a consistent approach should be taken, as far as possible, to paid rates awards and minimum rates awards. The proposal that paid rates awards take account of market considerations is not consistent, in our view, with the proposal that minimum rates awards may have their rates increased by enterprise bargaining on measures to improve efficiency and productivity. It is certainly incompatible with the requirements which we have already determined in this decision in relation to minimum rates awards and, in particular, the need to complete the minimum rates adjustment process. That, in itself, points to the need to avoid, at this stage, providing for market considerations to be available generally in the making and adjustment of paid rates awards.

Moreover, we continue to have serious reservations about the market being an appropriate consideration in the fixation of paid rates. In a different context, the Commission said (in its August 1989 National Wage Case decision):

"Too many employers still persist with their own form of market adjustment of wages based on area rates surveys. Such surveys and the actions that invariably follow them are a recipe for wage breakouts. They have been instrumental in encouraging employers to participate in a type of area wages ranking system with an in-built and continuing escalation effect which has aptly been described as a spiral of nonsense."(46)

This comment is applicable to the question whether the market should be accepted in wage fixation principles for paid rates awards. The rates and conditions in one paid rates award should not directly affect another. Each award should be justified on its own circumstances.

Market information has been misused to generate expectations and pressures for flow-on. Previous practices in both the collection of market rates material and the use of that material have aggravated these problems. Market rates information has been collected by the parties and has been presented to the Commission without prior consideration of the Commission (or any independent body) as to whether the survey methodology is appropriate. There also seems to be a loose acceptance by many parties that there is one market. There are clearly a range of markets for even the one classification.

As we have noted in our discussion of enterprise bargaining, the parties would need to address more rigorously the issue of how to treat increases in the area of minimum rates awards, based on improved productivity and efficiency, in any assessment of the market for paid rates awards. If the Commission's structural efficiency principles are generally implemented or bargaining for productivity reasons is encouraged in relation to minimum rates awards, the resultant increases in rates will be reflected in the market. If increases are available in paid rates awards for both productivity and market reasons, then double counting will occur. This will lead to an escalating market and industrial disputation over "rightful" positions in the market.

Although the parties argued for increased flexibility in paid rates awards, allowing attention to be given to attraction and retention and providing scope for performance pay and the like, they appear to require that the Commission play a monitoring role so as to ensure that the increased flexibility is not abused. Insufficient attention was paid in the proceedings to the nature and extent of the Commission's role. We are concerned _______________________________________________________________________________

(46)Print H9100, p.9

54 NATIONAL WAGE CASE APRIL 1991

particularly with performance based pay and schemes based on profitability and productivity. The Commission would need to be satisfied that, at least, the schemes are genuine, accepted by the employees and properly understood. For example, unless there is scope for employees in the same classification to receive different rates of pay based on considerations such as recruitment and retention and/or performance based pay considerations and the like, it is unlikely that there would be a significant increase in flexibility. In both the public sector overseas, and in many private schemes, mechanisms exist to prevent abuses. Such mechanisms ought to be examined to see whether they could be adapted to the Australian situation.

These considerations, the current state of the Australian economy and the possible impact on it of any move to adjust paid rates awards for market considerations lead us to conclude that, except in special cases, there should be no new paid rates awards made. In any such special case the parties must meet the requirements and principles determined by the August 1989 National Wage Case decision, as modified by this decision. No existing paid rates awards should, as a result of this decision, be adjusted on the basis of market considerations. Access to wage and salary increases under those paid rates awards will be subject to the same conditions as those specified in this decision for minimum rates awards.

All parties to the Paid Rates Review conferences agreed "that there is no need to require the rates in paid rates awards to be expressed as minimum rates plus supplementary payments as required by the current principles". This requirement was prescribed in the existing principle. However, in view of the attitude adopted unanimously by the parties to the Paid Rates Review Agreement, we are prepared to modify the August 1989 principles to provide that any new paid rates award must specify the classification prescribed in the relevant minimum rates award on which the actual rate prescribed for the key classification in the paid rates award is calculated. Such an approach is consistent with the continued requirement that classifications in awards of the Commission be reviewed to establish relativities. It would also be relevant to possible future changes in the role of National Wage Cases and the award system if further moves towards enterprise bargaining were to occur. Parties in the next proceedings should address the practical aspects of extending this requirement to all paid rates awards.

Many of the considerations associated with paid rates awards are relevant to section 115 agreements. Where these agreement contain wage rates they should be expressed as paid rates and fixed in the manner consistent with the requests for new paid rates awards. Any departure from this should be restricted to circumstances demonstrated to the Commission's satisfaction to be of a special and isolated nature.

This has been the situation since the August 1989 National Wage Case decision and section 115 has, in our view, operated effectively. It has allowed the development and certification of genuine agreements while preventing the use of section 115 as a device to circumvent the wage fixation system (and its principles) and jeopardising the operation of that system. In this connection, we endorse the reasoning in the decisions of the Commission in the H.J. Heinz Company Australia Limited(47) and Nestle Australia Limited(48) cases.

_______________________________________________________________________________

(47)Print J0713 (48)Print J1163

NATIONAL WAGE CASE APRIL 1991 55

We reiterate the Commission's view that, generally speaking, section 115 agreements should be made on an individual company basis.

WORK VALUE

The parties and interveners in these proceedings have suggested, directly or indirectly, alterations to the work value changes principle. For instance, the parties to the November agreement submitted that, in minimum rates awards, work value claims should be dealt with on a co-ordinated basis. Some suggested that a National Wage Case proceeding would be the suitable vehicle. The ACTU considered that an incremental work value approach was inappropriate and suggested instead that the assessment of work value changes should be based on relative work value having regard to the creation of proper relativities both internal and external to the award/s concerned.

We have considered carefully the submissions put by all parties and interveners, in light of the incompleteness of the minimum rates adjustment process (including the establishment of appropriate relativities) and what we have determined in relation to the continuation and extension of the structural efficiency principle, we consider it premature to vary the existing principle. There is one exception: the time from which a change in the nature of the work of a particular classification in a particular award is measured will be the date of operation of the second structural efficiency adjustment allowable in accordance with the 7 August 1989 National Wage Case decision.

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

PAYMENT BY RESULTS

The appropriate basis for calculation of wages in payment by results schemes and the protection of prescribed minimum rates and supplementary payments for workers involved in those schemes, were matters raised in these proceedings.

In the August 1989 National Wage Case decision, the Commission said:

"Debate in these proceedings again fell short of the detail which is necessary to make a final determination. Nevertheless, we are of the opinion that current payment by results schemes should continue to be part of the award structure and:

. it is essential that workers covered by such a scheme be subject to the protection of prescribed minimum rates plus supplementary payments for the work involved;

. additional payments derived from payment by results schemes should be absorbed into supplementary payments; and

. supplementary payments should not be used for the calculation of payment by results (although the re-expression of an existing base rate in an award as a minimum classification rate and a supplementary payment should not have the effect of prejudicing employees subject to existing incentive schemes)."(49)

_______________________________________________________________________________

(49)Print H9100, p.18

56 NATIONAL WAGE CASE APRIL 1991

No detailed discussion of these issues occurred and, on the material before us, there is no cause to change what was decided in the August 1989 case. However, in case there is any uncertainty about what the Commission meant in its 1989 decision, when it said that supplementary payments should not be used for the calculation of payments by results, we now make it clear that:

. supplementary payments should not be used for the calculation of payments by results;

. the basis for the calculation of such payments should be the appropriate minimum classification rate/s set in accordance with the August 1989 National Wage Case decision; and

. the re-expression of an existing classification rate in an award as a minimum classification rate and a supplementary payment should not have the effect of prejudicing employees subject to existing incentive schemes.

PAY DISCRIMINATION

Although the issues debated most extensively in this case were those pertaining to enterprise bargaining, the scope for wage increases and superannuation, there were other issues. One of these was the alleged persistence of discrimination against women and the danger that it might be exacerbated by the enterprise bargaining proposals being urged upon the Commission by major parties.

The AFBPW, in particular, dealt with this matter in detail. It did not assert that any awards differentiate explicitly between male and female workers. Its conception of discrimination was, rather, that the wage fixing system evaluates skills and job attributes in such a way that work typically performed by women tends to be devalued relative to work typically performed by men. The AFBPW asked the Commission to convene a work skills value enquiry to review all aspects of skill evaluation, including those which had a bearing on the relative evaluation of male and female work. It also opposed the proposed movement toward enterprise bargaining, arguing that this would adversely affect women.

We cannot predict the extent of the disadvantage which female workers will experience if the Commission gives its approval to a scheme of enterprise bargaining. We do accept, however, that enterprise bargaining - especially bargaining for overaward payments - places at a relative disadvantage those sections of the labour force where women predominate. This is a concern which might well be given more attention by the parties and interveners in future considerations of enterprise bargaining.

We do not consider that a general skills value enquiry is called for. Such an enquiry would, in our view, prove nebulous. The current principles (including the provision for special cases) already provide ample scope for the review of any specific instances where the work typically performed by females is alleged to be undervalued. We confirm the 1972 Equal Pay principles of the Australian Conciliation and Arbitration Commission(50) continue to apply and would be a relevant consideration in any such case.

_______________________________________________________________________________

(50)Print B8506; (1972) 147 CAR 172

NATIONAL WAGE CASE APRIL 1991 57

The ACTU, supported by the Commonwealth Government, called upon the Commission to ensure that the structural efficiency principle is implemented in a non-discriminatory manner. The ACTU cited cases where, in its view, implementation of structural efficiency has led to discrimination, for example, lack of training for some part-time employees. Section 93 of the Industrial Relations Act 1988 requires the Commission to take account of the principles embodied in the Racial Discrimination Act 1975 and the Sex Discrimination Act 1984. Parties appearing before the Commission in individual cases should raise any issue relevant to those proceedings which they consider inconsistent with the requirements of section 93 of the Act.

YOUTH WAGES

The ACTU and the Commonwealth and State Governments advocated the cessation of the prescription of wage rates by reference to age. Instead, rates should be related to competency and skills. The Commonwealth Government proposed that there be a separate Full Bench to consider this reform and issues related to it. In addition, the ACTU asked us to consider what it saw as an "immediate problem" in the manner whereby junior rates are now specified. This problem concerns alleged inconsistencies between awards, and even within them, in the identification of the adult rates to which junior rates are related. The CAI contended that it would be inappropriate for this Bench to determine these issues. Youth wages should be dealt with at another time, when they could be more fully debated.

We agree with the CAI that the various issues have been insufficiently discussed in these proceedings for us to contemplate changes to the existing approaches to the prescription of youth wages. The matter can be raised by a specific application, which would necessarily be dealt with in a special case.

WAGE ADJUSTMENTS

We turn to the questions whether award wage increases should be made available by this decision, the form of any such increases (specifically, whether they should be percentage or flat rate dollar increases) and the size of the increases. Our conclusions on these questions have been reached after having regard to:

. the state of the economy;

. movements in real wages;

. the results of our deliberations about the various proposals for enterprise bargaining and for paid rates awards;

. the objective of sustaining the processes of award and workplace reform;

. the terms upon which increases would be available; and

. our intentions about the unions' superannuation claim.

These matters are fully discussed elsewhere in this decision.

As always, the task of determining wage increases involves the balancing of conflicting criteria. There is no uniquely correct outcome.

58 NATIONAL WAGE CASE APRIL 1991

The unions' wage claim is for a general flat amount increase of $12.00 per week, to be available from 16 May 1991, plus additional unspecified amounts to be derived from enterprise bargaining and the market adjustment of paid rates awards. We have already discussed the latter and rejected the approaches suggested.

As we have already noted, the Commonwealth Government supported a $12.00 increase. It called for "a reasonable wage increase that is available to all, so as to provide a stable environment for progressing the restructuring/ structural efficiency task and to ensure continuing commitment to the system generally". The Governments of Victoria, Queensland, Western Australia, South Australia and Tasmania, along with the MTIA, supported an increase of $12.00. The CAI, supported by the ACM, the BCA, the ACC, the ABA, the ACT Government and the Northern Territory Government, argued for a deferral of our decision on the wage claim until a time closer to the operative date sought by the ACTU. The CAI, the ACM and the BCA indicated support for a national wage increase at some time, depending upon economic conditions. The CAI, in a submission indicating its position if the Commission were not to defer its decision, contended that wage increases should be based on achieved productivity via structural efficiency and be subject to a ceiling of about half of the $12.00, but expressed as a percentage. The ACM argued that, if wage increases were to be granted, they should be based on continuing commitment to structural efficiency and be considered on an award-by-award basis. The NSW Government, the NFF and the AWSBEF opposed the $12.00 claim.

Most of the parties and interveners, however, acknowledged that it would be unrealistic to expect further substantial progress under structural efficiency without access to a wage increase. They stressed that further progress was essential.

In support of the increase being a flat dollar amount, the Commonwealth Government said that:

". . . a flat amount eases the aggregate labour cost impact of the increase, thereby easing inflationary pressures with resultant economic benefits, while providing assistance to lower paid workers. Although a flat increase will lead to some limited compression of vertical percentage relativities, it will still maintain consistency of rates between minimum rates awards."

The view that it was important to maintain consistency between rates but less essential to preserve vertical relativities accorded with the position of the ACTU. On the other hand, the flat rate approach, because of the disturbance of vertical relativities, was opposed by the employer bodies generally and by the Governments of New South Wales, the ACT and the Northern Territory.

It is our opinion that a modest wage increase is desirable and, indeed, is vital to maintain the process of structural reform. This opinion arises from our consideration of issues dealt with in this decision, as does our assessment of the appropriate order of increase. It is unnecessary to repeat the terms upon which the increase would be available. The matter of flat rate versus percentage increases, however, requires some further comment.

In the February 1989 Review decision (endorsed in the August 1989 National Wage Case decision), the Commission said that:

NATIONAL WAGE CASE APRIL 1991 59

". . . minimum rates awards will be reviewed to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other minimum rates awards."(51)

In many awards, this facet of restructuring has not even commenced; in others, it is incomplete. The process has involved establishing specific relativities, defined in percentage terms, between classifications within awards and aligning classifications across awards. Without denying the possibility of redefining the vertical relativities in consequence of granting flat rate increases, we are reluctant to introduce this complication while the exercise is incomplete. More generally, we are concerned that considerations of cost, if accepted as a ground for flat rate increases, will very frequently cause a compression of relativities and that such a compression will create strong pressures for corrective increases. We acknowledge that flat rate increases have been granted in the past, but we have misgivings about the repetition of that approach particularly given the course set by the August 1989 National Wage Case decision.

Further reason for the approach adopted in relation to minimum rates and supplementary payments was the benefit to low wage and salary earners who suffered from inequities "due to the level of their award rates and their lack of substantial overaward payments".(52) That process is delivering substantial increases to low paid workers and is preferable to flat rate increases as a method of assisting them.

Upon satisfaction of the requirements set out in this decision, there will be available increases of 2.5 per cent in rates (including supplementary payments) prescribed in the Commission's awards. These increases will be accessible on application at any time from the date of this decision, but retrospectivity will not be permitted. We repeat that the Commission will carefully examine agreements presented for its approval. Should the parties to an award be unable to agree that the requirements for the increases have been met, the matter will be arbitrated.

The Commission, after hearing the parties to an award and being satisfied that a proper case has been made, may recommend that overaward payments be increased by 2.5 per cent.

It follows, from what we have decided in this case, that the various wage increases in the forms sought in the applications before us are refused.

NO EXTRA CLAIMS

The Commission will require each union claiming the increase available as a result of this decision to give a no extra claims commitment. That commitment will be inserted in the award in the terms prescribed in the principles.

SUPERANNUATION

In these proceedings the ACTU pressed a claim for increased superannuation contributions of three per cent phased in by amounts of one per cent from 1 July 1991, 1 May 1992 and 1 May 1993. It said:

_______________________________________________________________________________

(51)Print H8200, p.7 (52)Print H9100, p.14

60 NATIONAL WAGE CASE APRIL 1991

"The superannuation element of the agreement forms an integral part of the total package negotiated in terms of its role in the package and its importance in its own right. The remainder of the package - including the aggregate wage outcome agreed, the continuing focus on the structural efficiency process and the quantum of general wage increase sought - is unsustainable in the absence of the superannuation component. The superannuation element is an integral and inseparable part of the agreement and of the wage fixing package for 1990/1 required to produce an acceptable and sustainable wage fixing system."

It was supported by the Commonwealth Government which submitted that the claim was sustainable economically and that:

". . . occupational superannuation is a key element in the Government's retirement income policy of encouraging retirement provision by employees during their working lives to achieve adequate living standards."

And:

"The key to providing better income for the growing number of old people in the future is to increase savings now. Improved access to superannuation is the best way of achieving this."

It said that the former Commission's decision in 1986 to introduce award based superannuation had been the main impetus to the growth of superannuation coverage and improvements. However, superannuation contributions of only three per cent, as provided by awards, did not provide an adequate retirement benefit. While not in itself ensuring an adequate level of retirement income, a further amount of three per cent "will be a further critical step in establishing an effective retirement incomes system in Australia".

The Commonwealth Government provided material about the coverage of award-based superannuation. It indicated, inter alia, that:

. by 30 June 1990, there existed "a considerable diversity" of superannuation provisions in 490 federal awards;

. those awards were estimated to cover between 80 and 90 per cent of federal award employees;

. a significant number of awards prescribed a qualifying period of employment;

. a significant number of awards excluded all casuals or casuals who fail to meet qualifying requirements; and

. there was a high level of non-compliance with awards in some areas.

The Commonwealth Government referred to legislative and administrative actions which it had taken to remedy non-compliance.

Many of the parties and interveners opposed the unions' claim and submitted that the Commission should direct the parties into conference to consider a number of issues. Several noted that they had previously proposed a national conference on superannuation and retirement incomes policy, to be

NATIONAL WAGE CASE APRIL 1991 61

convened by the Commonwealth Government, but that their proposal had not been accepted. The CAI said that, while employers generally supported the extension of superannuation, they were concerned that significant problems had developed from the approach adopted. It said:

"The principal results of the union superannuation campaigns of the late 1980s have been the provision of additional benefits to a significant proportion of the workforce which was already well serviced with superannuation, some extension of a low level benefit to a further proportion of the workforce, but many workers who are still not covered by occupational superannuation. In large part the inequities which existed in superannuation coverage in the early 1980s have remained at the end of that decade."

In its June 1986 National Wage Case decision,(53) the former Commission expressed concern about a range of problems in the implementation and administration of superannuation schemes. Despite those concerns, it was prepared to introduce award based superannuation. We note the impact which that action has since had on the growth of superannuation provisions. We accept that those provisions have had and will continue to have an important role in the longer term retirement incomes strategy in Australia. In saying this we are not suggesting that the present standard of superannuation in the awards of the Commission ensures the achievement of the aims of that strategy. It does not. Nor would a doubling of that standard, which is the aggregate outcome sought in these proceedings; although it would significantly improve the likelihood of the strategy's being successful.

Despite that view, the Commission is concerned about some of the problems which were raised in the June 1986 National Wage Case decision. That concern is only increased by issues raised in the submissions of a number of the parties and interveners, including the Commonwealth Government, in these proceedings. Because of those concerns, we consider it essential that a concentrated attempt be made to deal with these issues at this stage of the development of award based superannuation; otherwise its further development may be flawed to the point of frustrating its contribution to the achievement of an adequate national retirement incomes system.

Consequently:

. we request the Commonwealth Government to convene a national conference on superannuation involving all relevant parties; and

. we adjourn the hearing of this element of the unions' claims. It will be resumed on the application of any party to these proceedings.

The conference, we expect, will review and clarify a number of vital issues about superannuation generally and, in particular, award based superannuation. It should consider, but not be restricted to:

. non-compliance;

. the desirability or undesirability of additional award based superannuation for employees already covered by non-award schemes;

_______________________________________________________________________________

(53)Print G3600

62 NATIONAL WAGE CASE APRIL 1991

. extension of award based superannuation to all awards as appropriate and particularly in State jurisdictions;

. flexibility in improving different aspects of award based superannuation;

. the application of superannuation to casual, part-time and short- term employees; and

. the role of the Commission in the long-term agenda for ensuring appropriate retirement incomes.

SPECIAL CASES

In this decision we have recognised the need for special cases during the period of operation of these principles. We do not lay down criteria for determining all special cases. We indicate, however, that we would expect any application to be consistent with the general thrust of this decision. A party making application for special consideration should also be prepared to make, and justify, an application pursuant to section 107 of the Act.

THE PRINCIPLES

As a result of the decisions reached in these proceedings, changes are required to the wage fixing principles established by the August 1989 National Wage Case decision. The changes are:

. a new structural efficiency principle which is to be read in conjunction with the principle determined in the August 1989 National Wage Case decision and which details the requirements that have to be satisfied by parties to awards seeking the increases allowable in accordance with this decision;

. a new wages adjustment principle which, inter alia, continues the minimum rates adjustment process and provides a special cases mechanism for any matters involving increases in wages and salaries and improvements in conditions which exceed the increases allowable under the principles generally;

. an alteration in the work value changes principle to provide that the time from which changes in the nature of the work should be measured is the date of operation of the second structural efficiency adjustment allowable under the August 1989 National Wage Case decision;

. deletion of the anomalies and/or inequities provision;

. a streamlining of the paid rates award principle; and

. clarification of the existing principles on first awards and extensions to existing awards, conditions of employment and standard hours.

No changes have been made to the allowances principle. Existing allowances which relate to work or conditions may be increased by 2.5 per cent at the time an award is varied to reflect the structural efficiency adjustment allowable under this decision.

NATIONAL WAGE CASE APRIL 1991 63

Finally, these principles provide that movement in wages and salaries and improvements in conditions - whether they occur in the public or private sector, whether they be award or overaward and whether they result from consent or from arbitration - must fall within the limits of this decision. This requirement was stressed by the Commission in its August 1989 National Wage Case decision. The Commission also commented, in this connection, on the difficulties created by employers applying differing rules to different people. We are far from satisfied that some employers - including the Commonwealth and State Governments - have acted consistently, despite the particular concerns expressed in that decision. The nature of the decision in this case, and the general environment in which it is made, make it imperative that the principles are applied strictly and consistently.

The amended principles are set out in Appendix A to this decision. They will continue in operation until reviewed. That review will commence on application and be finalised as soon as practicable after 1 November 1991.

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

In any proceedings to give effect to the principles, the parties should satisfy the Commission that the proposed award or order is within the ambit of a genuine industrial dispute.(54)

_______________________________________________________________________________

(54)See O'Toole v. Charles David Pty Ltd; 64 ALJR 618

64 NATIONAL WAGE CASE APRIL 1991

APPENDIX A

THE PRINCIPLES

These principles have been developed with the aim of providing, for their period of operation, a clear framework under which all concerned - employers, workers and their unions, governments and tribunals - can co-operate to ensure that labour costs are monitored; that measures to meet the competitive requirements of industry and to provide workers with access to more varied, fulfilling and better paid jobs are positively examined and implemented; and that lower paid workers are protected.

The principles provide that movements in wages and salaries and improvements in conditions - whether they occur in the public or private sector, whether they be award or overaward and whether they result from consent or arbitration - must fall within the level allowable in accordance with the National Wage Case decision of 16 April 1991.

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 contrived arrangements which would circumvent these principles and their aims.

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 a commitment that it will not pursue any extra claims, award or overaward, except in compliance with these principles, and for the duration of their operation.

When this no extra claims commitment is given, it shall be inserted in the award concerned in the following terms:

"It is a term of this award (arising from the decision of the Australian Industrial Relations Commission in the National Wage Case of 16 April 1991, the terms of which are set out in Print J7400) that the union(s) undertake(s), for the duration of the principles determined by that decision, not to pursue any extra claims, award or overaward, except when consistent with those principles."

STRUCTURAL EFFICIENCY

Consistent with the ongoing implementation of the structural efficiency principle determined in the National Wage Case decision of 7 August 1989, any party to a minimum rates award or a paid rates award seeking the increases in wages or salaries allowable under the National Wage Case decision of 16 April 1991 is required to satisfy the Commission:

(a) that the parties to the award have examined or are examining both award and non-award matters to test whether work classifications and basic work patterns and arrangements are appropriate - the examination to include specific consideration of:

NATIONAL WAGE CASE APRIL 1991 65

Appendix A - contd

(b) that facilitative provisions have been inserted in relevant clauses of the award;

(c) that the award requires enterprises to establish a consultative mechanism and procedures appropriate to their size, structure and needs for consultation and negotiation on matters affecting their efficiency and productivity;

(d) that the award, in order to ensure increased efficiency and productivity at the enterprise level, while not limiting the rights of either an employer or union to arbitration, provides a process whereby consideration can be given to changes in award provisions; any agreement reached under this process would have to be formally ratified by the Commission and any disputed areas should be subject to conciliation and/or arbitration;

(e) that there is a provision in the award to the effect that an employer may direct an employee to carry out such duties as are within the limits of the employee's skill, competence and training;

(f) that the parties to the award have implemented, substantially, the structural efficiency principle determined in the 7 August 1989 National Wage Case decision and have applied or are applying consequential award reforms to the workplace; and

(g) that the parties to the award have commenced the minimum rates adjustment process or are prepared to commence it, in the acceptably near future.

WAGE ADJUSTMENTS

1. Structural efficiency adjustment

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

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

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

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

66 NATIONAL WAGE CASE APRIL 1991

Appendix A - contd

2. Minimum rates adjustment

Minimum rates adjustments for minimum rates awards in accordance with the 7 August 1989 National Wage Case decision shall continue to be allowable under this decision and shall be in accordance with the following:

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

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

(c) supplementary payments will not be prescribed in the wages clauses of awards but in separate clauses which are to contain a definition making it clear that supplementary payments represent, in effect, minimum rates in lieu of equivalent overaward payments;

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

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

3. Special cases

Any claim for increases in wages and salaries or improvements in conditions in minimum rates awards or paid rates awards which exceed those allowable under the National Wage Case decisions of 7 August 1989 and 16 April 1991 will be processed as a special case and should be the subject of an application for reference pursuant to section 107 of the Act.

A party making application for special consideration should be prepared to make, and justify, an application pursuant to section 107 of the Act.

ALLOWANCES

1. Existing allowances

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

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

NATIONAL WAGE CASE APRIL 1991 67

Appendix A - contd

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

2. New allowances

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

(b) No other new allowances shall be created unless changes in work have occurred or new work or conditions have arisen: where changes have occurred or new work and conditions have arisen, the question of a new allowance, if any, shall be determined in accordance with the relevant principle.

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

3. Service increments

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

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

SUPERANNUATION

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

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

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

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

68 NATIONAL WAGE CASE APRIL 1991

Appendix A - contd

WORK VALUE CHANGES

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

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

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

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

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

(e) Where a significant net alteration to work value has been established in accordance with this principle, an assessment will have to be made as to how that alteration should be measured in money terms. Such assessment should normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work. However, 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.

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

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

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

NATIONAL WAGE CASE APRIL 1991 69

Appendix A - contd

PAID RATES AWARDS

Subject to special cases:

(a) paid rates awards will be adjusted in accordance with the structural efficiency and wage adjustments principles of this decision;

(b) the Commission will not make a new paid rates award.

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 State award rates and conditions prima facie will be the proper award rates and conditions.

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

CONDITIONS OF EMPLOYMENT

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

STANDARD HOURS

(a) In approving any application to reduce standard hours to 38 per week, the Commission should satisfy itself that the cost impact is minimised, for example, 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) Changes in work practices designed to minimise the cost of introducing shorter hours will not be a consideration for claims under any other principle.

70 NATIONAL WAGE CASE APRIL 1991

Appendix A - contd

ECONOMIC INCAPACITY

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

NATIONAL WAGE CASE APRIL 1991 71

APPENDIX B

MAY REVIEW 1990

Preliminary Areas of Agreement

We note that at this preliminary stage there appear to be important areas of agreement emerging between the participants in the May Review. These areas include the following:

1. The parties take a positive attitude to the structural efficiency process, support that process, and consider that it should be continued after the second structural efficiency adjustment and beyond the life of the current system.

2. Results of award restructuring to date have been uneven, with both areas of substantial progress and areas where progress has been less than satisfactory.

3. The workplace is where any productivity impact can be achieved and where the effectiveness of structural efficiency exercises is ultimately to be assessed.

4. Actual productivity improvement resulting from structural efficiency exercises has to date been limited although the potential for such improvement to occur exists.

5. To date a primary emphasis of structural efficiency exercises has been directed at the issues of classification restructuring, training and associated issues. While other aspects of award and non-award industrial arrangements have also been addressed, they have received less emphasis, or have been addressed through the means of an award modernisation clause or similar form of enterprise flexibility provision.

6. To date structural efficiency exercises have focused on award level change.

7. The process of change should continue and the pace where necessary be accelerated, particularly at the enterprise level and the Commission and all parties have an important role in this respect.

8. The agenda for change should be broad and all parties have a responsibility to address the full agenda.

9. If the Commission's objectives are to be achieved, there is a need to reinforce the Commission's stated position that relativities in minimum rates awards are set strictly on the basis of the Commission's tests of skill, responsibility and the conditions under which work is performed, and on the basis that they are consistent with the rates and relativities fixed for comparable classifications in other minimum rates awards.

10. The Commission should reinforce the need for the consistent application of the principles in all awards within both federal and State jurisdictions.

72 NATIONAL WAGE CASE APRIL 1991

Appendix B - contd

11. Minimum rates awards should contain proper definitions of supplementary payments to adequately reflect their nature, with clear specification of the extent of absorption of wage increases arising out of the structural efficiency process and in particular, the requirement for absorption of minimum rates adjustments.

12. Any difficulties with the absorption of minimum rates adjustments, which cannot be resolved in the first instance by the parties in a manner consistent with the minimum rates adjustment principle, should be brought to the attention of the Commission for appropriate action. Difficulties with the absorption raise questions about compliance with commitments relating to absorption.

13. The cost impact of minimum rates adjustment can be addressed in the first instance through the provisions of the minimum rates adjustment principle including extended phasing in. Employers have the right to argue for exemptions or ultimately to avail themselves of the incapacity to pay principle.

14. The role of the Commission in structural efficiency exercises should be to:

. provide the framework within which structural efficiency exercises can be conducted;

. assist the parties through conciliation to address all relevant issues and reach agreement; the extent of the Commission's involvement will depend on the capacity and willingness of the parties to address issues and achieve change;

. where the Commission is not satisfied that an agreement is consistent with the requirements of the structural efficiency principle and can be approved it should:

. where the parties cannot reach agreement the Commission shall arbitrate and in so doing:

- the responsibility for justifying a structural efficiency adjustment or changes introduced through a structural efficiency exercise falls on those seeking the change;

. the requirements of the structural efficiency principle remain the same whether the matter is a consent or arbitrated matter.

NATIONAL WAGE CASE APRIL 1991 73

Appendix B - contd

15. All parties accept the requirement of the structural efficiency principle to address discriminatory award provisions and agree that care needs to be taken during structural efficiency exercises to ensure that the interests of particular groups, such as women, are taken into account.

16. As part of the structural efficiency process, awards should be simplified to make their meaning clear to award users.

17. Clear definitions of classifications should be established before any relativities are determined.

Areas of Disagreement

1. Whether supplementary payments should vary on the basis of geographical location, industry, individual employer or some other basis as outlined by the Commission at page 14 of the August 1989 National Wage Case decision; and if so, the circumstances in which they should vary.

2. Whether the Commission should adopt the Victorian clerical rates as the rates to apply in clerical awards of all tribunals.

3. The meaning and application of the term "negative cost cutting".

4. Whether the Commission should adopt a more flexible approach to the certification of agreements and the nature of that more flexible approach.

5. Whether the structural efficiency three per cent is to be calculated by reference to actual rates or award rates.

6. The form that award modernisation or enterprise flexibility provisions should take.

7. Whether or not the current minimum rate adjustment process should extend to consistency of components (minimum classification rate and supplementary payment) as well as the total minimum rate.

8. Whether the Commission should replace each of the specific ranges set out on page 13 of the August 1989 National Wage Case decision with specific rates and/or relativities.

9. Whether the base rate, supplementary payments and total minimum rates for each classification should be contained within a single clause, in columns, within an award.

10. The means by which, and manner in which, trade union and award coverage and structures can and should be rationalised.

11. The relationship between the minimum rates adjustment and payment by results systems.

12. The youth rates issue and the extent to which adequate information on the economic implications, the differing costs to industry sectors and the social effects on young people of any change proposed in this area requires evaluation before this matter can be effectively progressed by the Commission.

74 NATIONAL WAGE CASE APRIL 1991

APPENDIX C

PAID RATES REVIEW

Areas of Agreement

1. The option of paid rates awards

Paid rates awards should continue to be an option for the parties and there should be no requirement to convert paid rates awards into certified agreements. However, paid rates awards should only be entered into after careful consideration.

2. Available on the basis of limited coverage

Paid rates awards should only be available on a basis of limited coverage. In most cases this would be on a single enterprise/employer basis, including single government enterprises/employers with employees over a range of departments and/or agencies but in some cases could be on the basis of a small group of enterprises/employers with common interests.

3. Matters to be dealt with in a paid rates award

Paid rates awards should cover all important aspects of the employment relationship considered appropriate for award regulation.

4. The integrity of paid rates awards

The integrity of paid rates awards should be preserved, and the Commission should have an important role in this through the conduct of reviews and, if necessary converting paid rates awards to minimum rates awards after appropriate hearings.

5. Formal commitments as to maintaining integrity

On the making of the award and at the time of major reviews and at any other time deemed appropriate by the Commission, the Commission may require from the parties commitments that they will maintain the integrity of the award. This commitment may take the form of a statutory declaration, but statutory declarations should not be necessary for every award variation.

6. Market

The market is an appropriate consideration in the fixation of paid rates award rates.

7. Skill and responsibility

Skill and responsibility is an appropriate consideration in the fixation of paid rates award rates.

8. Recruitment and retention

Recruitment and retention are appropriate considerations in the fixation of paid rates award rates.

NATIONAL WAGE CASE APRIL 1991 75

Appendix C - contd

9. Profit sharing and performance related pay schemes available

Both profit sharing and performance related pay schemes should be available to the parties covered by paid rates awards and are not considered to be incompatible with paid rates awards.

10. Commission role in relation to profit sharing pay schemes

. Profit sharing pay arrangements should not be covered by award regulation but the Commission may require information about such arrangements.

. The piecework arrangements should be covered by award regulation.

11. Collective review

In a review of a paid rates award applying to a single enterprise/employer or a number of enterprises/employers (see paragraph 2), consideration should be given to internal relativities, if necessary, by a process of collective review of all the paid rates awards applying only to the particular enterprise/employer or enterprises/employers. Relevant factors in such a review are the particular circumstances of the enterprise/employer or enterprise/employers, including the particular market.

12. Introduction by consent

Other than in exceptional circumstances such as where the enterprise's/employer's operations are predominantly paid rates in nature, paid rates awards should only be introduced by consent. However, the terms of paid rates awards may be arbitrated either on introduction or subsequently.

13. The expression of rates

There is no need to require the rates in paid rates awards to be expressed as a minimum rate plus supplementary payments.

14. The principles applying to making of new paid rates awards

The existing first award principle is inappropriate for the making of new paid rates awards and the same criteria should apply both to the making of new paid rates awards and the variation of paid rates awards.

15. No reliance on nexus

The terms of paid rates awards should be determined according to the principles adopted by the Commission; reliance on nexus in itself provides no justification for a paid rates adjustment.

76 NATIONAL WAGE CASE APRIL 1991

Appendix C - contd

16. Information about the market

It is not possible to devise a formula enabling precise or scientific assessment of a "market rate"; the market comprises a range of rates. Rather, information may be sought about the market and this information may provide a broad guide to the market for use by the parties and Commission but should not be given undue weight. It should be recognised that there is a limit to the specificity which it is possible to achieve on this issue and others relating to paid rates awards and at some stage the Commission will have to exercise a discretionary judgement on the basis of general guidelines, as it does in many other areas of its operations.

17. Establishment of properly fixed classifications and relativities

In the first instance, before any steps are taken to obtain information about the market, appropriate classifications and internal relativities should exist or be set for the workplace or sector concerned on the basis of skill and responsibility.

18. Effect of market information on internal relativities

Market information should not be used to alter the internal relativities already set without good and sufficient reason and the onus must lie on any party seeking to alter those relativities to demonstrate good and sufficient grounds for alteration.

19. Work must be comparable

When using information about market rates of pay, care must be taken to ensure that the rates examined have been set for classifications which are comparable and that conditions of employment have been objectively taken into account.

20. Rates not increases to be taken into account

In obtaining information about market rates, the relevant consideration is the level of actual rates paid not the amounts of any increases in rates.

21. Stability of paid rates awards

Paid rates, once fixed, shall not be varied for market reasons for a reasonable period which may be specified in the award.

22. Recruitment and retention

It has to be understood that reliance on wage rates alone to solve recruitment/retention problems is inappropriate and can be counterproductive. Other mechanisms should be used to deal with this problem: e.g. training, the reorganisation of work and union structures, review of classification structures.

NATIONAL WAGE CASE APRIL 1991 77

Appendix C - contd

23. Service increments

Increments should be available to parties to paid rates awards but these payments must be bona fide, based on proper assessments of skill and responsibility, and there must be no double counting.

24. Different rates for the same classification

Different rates may apply to different employees working under the same classification provided that differences are based on appropriate criteria relating to factors such as experience or performance.

25. Tests for consent and arbitrated awards

The Commission should apply the same tests for consent and arbitrated awards.

26. Role of the Commission and the parties

. In relation to the fixation or adjustment of paid rates awards on market grounds, the parties will inform the Commission of the steps taken to obtain information about the market.

. The Commission will guide and assist the parties in that task.

. The Commission and the parties will need to be satisfied that, in the circumstances of the specific case, the steps proposed or taken will provide the relevant information having regard to the following:

. The range of market information collected by the parties shall be available to the Commission in whatever form it requires.

. Care must be taken to ensure that the rates fixed do not lead to wage adjustments elsewhere.

. Having regard to all relevant information, the parties may negotiate the terms and conditions of the paid rates award in accordance with all the relevant principles of the Commission, with the assistance of the Commission, if necessary.

. The parties will submit their agreement to the Commission for approval.

. If necessary, the Commission may arbitrate on any matters not agreed.

27. The public sector

The preceding rules shall apply to both the public and private sectors.

78 NATIONAL WAGE CASE APRIL 1991

Appendix C - contd

The parties also discussed the test which should be adopted by the Commission with respect to certified agreements and the issue of whether and in what circumstances the details of performance related pay should be specified in awards. The parties did not reach agreement in this respect.

NATIONAL WAGE CASE APRIL 1991 79

APPENDIX D

REVIEW OF WAGE FIXING PRINCIPLES

Areas of Agreement

1. Award types

(a) Minimum rates awards

Minimum rates awards should contain consistent minimum rates which bear an appropriate relationship with each other. Any changes in minimum rates should be on work value grounds (as in current principles). Work value claims will be dealt with on a co-ordinated basis.

(b) Paid rates awards

Paid rates awards should contain total rates of pay which are fixed according to principles established in the paid rates review.

(c) Section 115 agreements

Section 115 agreements should contain total rates of pay fixed consistently with paid rates awards principles.

2. National Wage Cases

On application but no more frequently than annually, the Commission will consider whether wage increases should be made generally available where award conditions are in the process of change to increase productivity and efficiency. All options should be open to the Commission and there should be no presumption that it will adopt any particular option.

3. Supplementary payments

Supplementary payments should continue to be available in minimum rates awards according to principles established by the Commission.

4. No extra claims commitment

Unions must give a commitment to make no extra claims except in accordance with the wage fixing principles, including those relating to enterprise/workplace negotiation.

5. Enterprise flexibility/award modernisation

(a) Each award will contain an enterprise flexibility/award modernisation clause, so that agreed variations in award conditions, working practices or arrangements may be implemented.

(b) Enterprise flexibility/award modernisation clauses will allow for negotiation on arrangements for forms of performance related payments, or on wage increases for achieved increases in productivity and efficiency.

80 NATIONAL WAGE CASE APRIL 1991

Appendix D - contd

6. Enterprise/workplace negotiations

(a) Preamble

The focus of enterprise/workplace negotiations should be on the implementation of the structural efficiency principle at the enterprise/workplace level.

(b) Establishment of guidelines

The Commission should establish a framework of general guidelines for enterprise/workplace negotiations. Where practicable precise guidelines for each industry, sector or enterprise may be negotiated between the parties, but should be consistent with the general guidelines.

(c) Guidelines

NATIONAL WAGE CASE APRIL 1991 81

Appendix D - contd

7. Bargaining units and award coverage

In order to facilitate enterprise/workplace negotiations, single bargaining units are desirable.

8. Paid Rates and May Review

The parties continue to support the agreed documents arising out of the May Review and Paid Rates Review conferences.

9. Disagreed matters

(a) Whether the criteria for enterprise/workplace claims should enable claims to be made on the basis of achieved increases in profitability.

(b) Whether supplementary payments should vary on the basis of geographical location, industry, individual employer or some other basis as outlined by the Commission at page 14 of the August 1989 National Wage Case decision; and if so, the circumstances in which they should vary. (Paragraph 1 of the Areas of Disagreement, CAI 6, May 1990 Review)

(c) Whether the criteria should specifically provide that there should be consistency of application of the criteria to all employees within an enterprise or workplace, and the meaning and application of any such provision.

(d) Whether the criteria should specifically provide that enterprise agreements should not detract from national standards and the meaning and application of any such provision.

(e) The means by which and manner in which trade union and award coverage and structures can and should be rationalised. (Paragraph 10 of the Areas of Disagreement, CAI 6, May 1990 Review)

82 NATIONAL WAGE CASE APRIL 1991

Appearances:

G. Belchamber, I. Watson and M. Gaynor intervening for the Australian Council of Trade Unions with B. Eames for The Federated Millers' and Manufacturing Grocers' Employees' Association of Australasia, B. Fraser for the Metal Trades Federation of Unions, J. Cahill for the Printing and Kindred Industries Union, J.P. Maynes for the Federated Clerks Union of Australia, J. Lawrence for The Federated Miscellaneous Workers Union of Australia, K. McGrath for the Transport Workers' Union of Australia, S. Gibbs for The Municipal Officers' Association of Australia and J. de Bruyn for the Shop, Distributive and Allied Employees Association.

N.A. Davis for the Printing and Kindred Industries Union.

G. McConville for The Association of Professional Engineers, Australia and intervening for the Australian Council of Professional Associations.

G. Giudice of counsel with B.M. Noakes and R.S. Hamilton intervening for the Confederation of Australian Industry and respondent members of the Chamber of Commerce and Industry, South Australia Inc., Northern Territory Confederation of Industry and Commerce Inc., Municipal Association of Victoria, Confederation of A.C.T. Industry and Brisbane City Council and with G. John and M. Quirk for The Victorian Employers Federation and J. Hargreave for the Printing and Allied Trades Employers' Federation of Australia.

I. Macphee of counsel with B. Watchorn for The Australian Chamber of Manufactures.

R.P. Boland with M. Scott for the Metal Trades Industry Association of Australia and the Engineering Employers Association, South Australia.

N. Kimberley with J. Tolley and B. Deveson for the Australian Road Transport Industrial Organization.

P. Gaynor for the National Transport Federation Limited.

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

A. Glazebrook for Her Majesty the Queen in right of the State of Victoria (intervening).

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

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

P. Wright for Her Majesty the Queen in right of the State of South Australia (intervening).

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

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

NATIONAL WAGE CASE APRIL 1991 83

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

T. Tsikouris for the Government of the Northern Territory (intervening).

D.J. Bleby, Q.C., with S. Amendola of counsel and J. Markham for the Meat and Allied Trades Federation of Australia (intervening).

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

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

B. Richardson and B. Dennis for the Australian Federation of Construction Contractors (intervening).

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

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

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

B. Davis for the Australian Chamber of Commerce (intervening).

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