Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 5,Item 6 - Review of all modern awards (other than modern enterprise and State PS awards) after first 2 years

Australian Federation of Employers and Industries
(AM2012/235)

Modern Awards Review 2012 - application to vary Marine Tourism and Charter Vessels Award 2010 - two yearly review of all modern awards - obvious technical problem - consent to vary - retrospectivity refused - existing employees ‘grandfathered’- determination made.

[1] This decision will determine an application filed by the Australian Federation of Employers and Industries (the ‘Federation’) to vary the Marine Tourism and Charter Vessels Award 2010 [MA000093] (the ‘Award’). The application was made,pursuant to Schedule 5,item 6 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the ‘Transitional Act’) as part of the review of all modern awards which the Fair Work Commission (the ‘Commission’) is statutorily required to conduct after the first two years of all modern awards coming into effect (the ‘2012 Review’).

[2] The Federation’s original application sought variations to the Award in the following provisions:

●casual employment;
●classification structure;and
●annual leave.

[3] That part of the application in respect to annual leave was subsequently referred to a Full Bench of the Commission and rejected by the Full Bench together with a number of similar applications in respect to other modern awards in Modern Awards Review 2012 - Annual Leave [2013] FWCFB 6266. The variation in respect to casual employment was withdrawn on 9 September 2013,prior to a hearing/conference of the application on 11 September 2013. The residual matter is that concerning the classification structure. In this respect,the Federation sought the following variations:

‘1. By deleting clause B2.2(a) in Schedule B - Classification Structure and Definitions and inserting instead the following clause:

B.2.2 Crew Level Two

(a) After completing the first three months of employment (probationary period) and upon the completion of the Introduction Deckhand Course or relevant experience/qualifications as determined by the employer,the employees’wage level will rise to that of the Crew Level Two wage.

2. The variation set out in clause 1 comes into operation from January 2010. However the variation does not take effect so as to require any employee to repay any payments made in the period 1 January 2010 to [insert date]’

[4] At the conference/directions hearing on 11 September 2013,the Federation pressed this part of the application. The Maritime Union of Australia (MUA) and the Australian Institute of Marine and Power Engineers (AIMPE) (collectively,the ‘Unions’) opposed the application. Directions were issued that day for interested parties to file and serve evidence and submissions. Only the Federation and the two Unions chose to do so. I shall come back to these submissions shortly.

Relevant statutory framework

[5] Schedule 5,Item 6 of the Transitional Act provides:

‘(1) As soon as practicable after the second anniversary of the FW (safety net provisions) commencement day,FWA must conduct a review of all modern awards,other than modern enterprise awards and State reference public sector modern awards.

(2) In the review,FWA must consider whether the modern awards:

(a) achieve the modern awards objective;and

(b) are operating effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.

(2A) The review must be such that each modern award is reviewed in its own right. However,this does not prevent FWA from reviewing 2 or more modern awards at the same time.

(3) FWA may make a determination varying any of the modern awards in any way that FWA considers appropriate to remedy any issues identified in the review.

(4) The modern awards objective applies to FWA making a variation under this item,and the minimum wages objective also applies if the variation relates to modern award minimum wages.

(5) FWA may advise persons or bodies about the review in any way FWA considers appropriate.

(6) Section 625 of the FW Act (which deals with delegation by the President of functions and powers of FWA) has effect as if subsection (2) of that section included a reference to FWA’s powers under subitem (5).’

[6] Provisions of the Fair Work Act 2009 (the Act) are also applicable and relevant to the 2012 Review. Sections 134 provides as follows:

‘134 The modern awards objective

What is the modern awards objective?

(1) FWA must ensure that modern awards,together with the National Employment Standards,provide a fair and relevant minimum safety net of terms and conditions,taking into account:

(a) relative living standards and the needs of the low paid;and

(b) the need to encourage collective bargaining;and

(c) the need to promote social inclusion through increased workforce participation;and

(d) the need to promote flexible modern work practices and the efficient and productive performance of work;and

(e) the principle of equal remuneration for work of equal or comparable value;and

(f) the likely impact of any exercise of modern award powers on business,including on productivity,employment costs and the regulatory burden;and

(g) the need to ensure a simple,easy to understand,stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards;and

(h) the likely impact of any exercise of modern award powers on employment growth,inflation and the sustainability,performance and competitiveness of the national economy.

This is the modern awards objective.

When does the modern awards objective apply?

(2) The modern awards objective applies to the performance or exercise of FWA’s modern award powers,which are:

(a) FWA’s functions or powers under this Part;and

(b) FWA’s functions or powers under Part 2-6,so far as they relate to modern award minimum wages.’

The 2012 Review

[7] In June 2012,a Full Bench of the Commission handed down a decision in relation to the 2012 Review;See:Modern Awards Review 2012 [2012] FWAFB 5600 (‘Modern Awards Review 2012’). At paragraph 63 the Bench said:

‘[63] Under sub item 6(3) of Schedule 5,the Tribunal has a broad discretion to vary any of the modern awards in any way that it considers necessary to remedy any issues identified in the Review. However,sub item 6(4) provides that in making such a variation the Tribunal must take into account the modern award objective in s.134 of the FW Act,and,if varying modern award and minimum wages,the minimum wages objective in s.284.’

[8] The Bench also said at para [85]:

‘[85] Two points about the historical context are particularly relevant. The first is that awards made as a result of the award modernisation process are now deemed to be modern awards for the purposes of the FW Act (see Item 4 of Schedule 5 of the Transitional Provisions Act). Implicit in this is a legislative acceptance that the terms of the existing modern awards are consistent with the modern awards objective. The second point to observe is that the considerations specified in the legislative test applied by the Tribunal in the Part 10A process is,in a number of important respects,identical or similar to the modern awards objective which now appears in s.136.’

[9] At paras [99]-[100],the Full Bench continued:

‘[99] To summarise,we reject the proposition that the Review involves a fresh assessment of modern awards unencumbered by previous Tribunal authority. It seems to us that the Review is intended to be narrower in scope than the 4 yearly reviews provided in s.156 of the FW Act. In the context of this Review the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so,such as a significant change in circumstances which warrants a different outcome. Having said that we do not propose to adopt a “high threshold”for the making of variation determinations in the Review,as proposed by the Australian Government and others.

[100] The adoption of expressions such as a “high threshold”or “a heavy onus”do not assist to illuminate the Review process. In the Review we must review each modern award in its own right and give consideration to the matters set out in subitem 6(2). In considering those matters we will deal with the submissions and evidence on their merits,subject to the constraints identified in paragraph [99] above.’

[10] As to retrospectivity,the Full Bench said at paras [112]-[115]

‘[112] Subitem 6(3) confers a broad discretion on the Tribunal to vary any of the modern awards in any way it considers necessary to remedy any issues identified in the Review. Specifically the provision does not impose any restrictions upon the Tribunal as to the operative date of any variation determination made as part of the Review.

[113] Ai Group submitted that,in the context of the Review,the Tribunal should apply long standing past practice and only grant a retrospective operative date if “satisfied that there are exceptional circumstances”.

[114] We accept the proposition that it has been a long standing practice of the Tribunal and its predecessors that retrospectivity is not granted except in special and exceptional circumstances. This general approach now finds legislative expression in ss.165,166 and 167 of the FW Act. The ACTU submitted that,in the context of the Review,the Tribunal “should also be guided by the operational provisions in ss.165,166 and 167 regarding retrospectivity”.

[115] For our part,we accept that as a general principle,variation determinations arising out of the Review should operate prospectively,unless there are exceptional circumstances which warrant a retrospective operative date. [Footnotes omitted]’

SUBMISSIONS

[11] All parties relied on the legislative instruction dealing with the modern awards objective and noted that cogent reasons must exist in order for the Commission to revisit matters previously considered during the modern award process;See:Modern Awards Review 2012,supra above.

[12] The Federation described the variation sought as falling within the scope of the two year Review and as merely correcting an obvious error. It submitted:

‘ The modern award is not operating effectively without technical problems. It contains an obvious error in clause B.2.2(a) concerning the wage rate applicable to an employee who is classified as Crew Level 2. The relevant provision is as follows:

B.2.2 Crew Level 2

(a) After completing the first three months of employment (probationary period) and upon completion of the Introduction Deckhand Course or relevant experience/qualifications as determined by the employer the employees’wage level will rise to of the Crew Level 3 wage

• The error is obvious,with clearly a reference to an incorrect wage rate. The error appears to have occurred in drafting the final version of the modern award by the Australian Industrial Relations Commission,as the Exposure Draft Award in May 2009 contained no details of classification definitions.



• The wage rates for a Crew Level 2 are set out in clause 13.1 (a) for overnight charter employees and 13.2 (a) for non-overnight charter employees,the relevant provisions are set out below. It can be seen that the error is even more obvious concerning non-overnight charter employees as there is no classification and wage rate for a Crew Level 3.




13.1 Adult employee minimum

(a) Overnight Charter Employees wages

The classifications and minimum wages for full-time and part-time adult Overnight Charter Employees are set out in the following table:

	Classification	Daily Rate $
	Crew Level 1	133.94
	Crew Level 2	142.13
	Crew Level 3	148.45
	Dive Master/Dive Instructor	148.45
	Coxswain	160.35
	Master V	203.86
	Master IV	228.64

13.2 Non-overnight Charter Employees

(a) The classifications and minimum wages for full-time and part-time adult Non-overnight Charter Employees are set out in the following table:

	Classification	Weekly rate
		$
	Crew Level 1	623.30
	Crew Level 2	685.50
	Coxswain	746.70
	Engineer MED III	750.20
	Master V	750.20
	Engineer MED II	763.80
	Master IV	763.80
	Engineer MED I	839.80

• The proposed variation is necessary to remove any confusion arising from the incorrect reference in Clause B.2.2 (a) to Crew Level 3.



• The error should be corrected by reference to the wage level of Crew Level 2 effective from 1 January 2010,as set out in the attached draft determination.’

[13] While the Unions recognised that there may be a technical problem,they opposed the retrospectivity of the variation and its application to existing employees who have been in receipt of the Level 3 rate for a number of years.

[14] The Unions argued that the Federation was now asking for retrospectivity some 18 months after the application had been lodged and where no such application was made at the time. In any event,the Commission would not depart from its longstanding practice of not awarding retrospectivity in the absence of special and exceptional circumstances;See:Modern Awards Review 2012 at paras [112]-[115]. It was submitted that the Federation had not made any submission or led any evidence to demonstrate the existence of special and exceptional circumstances.

[15] The Unions argued that the practical effect of the Federation’s proposed variation would be to reduce the salaries of current affected employees by $6.30 per day. This would be patently unfair and have serious consequences for the employees and their families who have been accustomed to these pay rates for many years.

[16] In any event,cl 2.4 of the Award operates to ensure that no employee would suffer a reduction in take home pay as a result of the making of the Award or the operation of any transitional arrangements. The Unions proposed different draft determinations,which had essentially the same effect of rectifying the error,while ensuring that no existing employee would be affected and that the variation was not retrospective.

CONSIDERATION

[17] It would seem that all parties are ad idem in acknowledging that the references to Crew Level 3 and not Crew Level 2 in Cl B.2.2(a) is an error or a technical problem. It would appear to have arisen as a drafting error when the Award was made on 4 September 2009. For my own part,I agree that the error is obvious,particularly when considered in the context of the classification at 13.2 - Non-overnight Charter Employees,where there is no classification for Level 3. It must obviously lead to a conclusion that the reference to Level 3 in Cl B.2.2(a) is a technical problem.

[18] I am satisfied that the correction of this error is consistent with Subitems 6(2) of Sch 5 of the Transitional Act and the modern awards objective. Nevertheless,the Unions strongly oppose,firstly,any retrospectivity of the application,the effect of which would be obvious (a requirement for the employees affected to pay back $6.30 a day for all days back to the date of the variation) and,secondly,the application of the variation to any employee who has been in receipt of the higher amount since 2009 (described as a ‘unilateral wage reduction’). The Unions proposed that if the Commission was minded to make the variation,existing employees should be ‘grandfathered’from its effects.

[19] In my view,no case has been made out by the Federation to depart from the longstanding convention of the Commission and its predecessors not to award retrospectivity,unless special and exceptional circumstances are demonstrated. This convention was reaffirmed in Modern Awards Review 2012 at paras [112]-[115],supra above. In short,the Federation offered no special and exceptional circumstances which would justify any retrospectivity of the application. I refuse that part of the application.

[20] As to the effective ‘grandfathering’of the Level 3 rate to existing employees,this submission is somewhat more problematic. On the one hand,the employees have had the benefit of a higher wage rate to which they were otherwise not entitled. On the other hand,it is curious that if this outcome was such a significant impost on employers that it has taken so long for any serious attention to be given to it. The Unions,correctly in my view,have characterised the variation sought as a wage reduction;not envisaged by,or expressly permitted by the making of the Award at the time. I do not see how it could be viewed otherwise,given the clear wording of Cl 2.4 of the Award as follows:

‘2.4 Neither the making of this award nor the operation of any transitional arrangements is intended to result in a reduction in the take-home pay of employees covered by the award. On application by or on behalf of an employee who suffers a reduction in take-home pay as a result of the making of this award or the operation of any transitional arrangements,Fair Work Australia may make any order it considers appropriate to remedy the situation.’

[21] In the result,I am persuaded that it would be unfair and contrary to the modern award objective and to the terms of cl 2.4 of the Award to effectively reduce the take-home pay of affected employees who have been paid,and have become accustomed to being paid,at the Level 3 rate for a number of years. I consider that the draft determination proposed by the MUA reflects my findings in this matter and I propose to adopt it. A determination in substantially these terms will be published in conjunction with this decision.

DEPUTY PRESIDENT

Appearances:

J Light for the Applicant.

W McNally,Solicitor for the Maritime Union of Australia

N Niven,for the Australian Institute of Marine and Power Engineers

Hearing details:

Sydney:

2013.

11 September.

Final written submissions:

Applicant - 18 September 2013

Maritime Union of Australia - 4 October 2013

Australian Institute of Marine and Power Engineers - 9 October 2013

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<Price code C, MA000093  PR544014 >