Industrial Relations Commission of New South Wales CITATION : State Wage Case 2003 [2003] NSWIRComm 174 Aged Services Association of NSW (Industrial) Association of Foremen and Supervisors Australian Business Industrial Australian Catholic Commission for Employment Relations Australian Nursing Homes and Extended Care Association, New South Wales Australian Retailers Association, New South Wales Division Australian Workers' Union of New South Wales Concrete Pavious' Association Employers First and affiliated organisations Engineering Construction Laboratories Association Furnishing Industry Association of Australia (Management Services) Gas Employees' Union Gas Industry Salaried Officers Federation, New South Wales Branch PARTIES : Gramophone Records Industry Union of New South Wales Labor Council of New South Wales Local Government Association of New South Wales and Shires Association of New South Wales Master Builders' Association of New South Wales Minister for Industrial Relations Motor Traders' Association of New South Wales New South Wales Glass and Glazing Association New South Wales Road Transport Association New South Wales Soft Drink Association Country Division Public Employment Office Registered Clubs Association of New South Wales State Chamber of Commerce (Industrial Relations) Association The Australian Industry Group New South Wales Branch The Australian Rail, Tram and Bus Industry Union, New South Wales FILE NUMBER: IRC 2411 of 2003 CORAM: Wright J President; Walton J Vice-President; Harrison DP; Boland J; Redman C; Tabbaa C CATCHWORDS : State Wage Case - Summons to show cause - Awards - National decision - Sitting in Newcastle - Centenary of the Commission - Decision of the AIRC - Whether national decision should be implemented in New South Wales - Economic considerations - National economy - State economy - Consensus of the parties - Submissions of the parties - Decision issued on 27 May 2003 - Reasons for decision now issued - Adoption of National Decision - Consequential minor variations to Principles - Lagging awards - Principles - Principles issued - Orders confirmed LEGISLATION CITED : Industrial Relations Act 1996 Part 3 of Chapter 2 s 48 s 50 & s 52 Safety Net Review - Wages, May 2003, Print PR002003 CASES CITED : State Wage Case 2001 (2001) 104 IR 466 State Wage Case 2002 (2002) 114 IR 82 HEARING DATES: 05/26/2003; 05/27/2003 DATE OF JUDGMENT: 06/06/2003 Mr M Gadiel with Mr E Razborsek for the Labor Council of New South Wales; Australian Workers' Union of New South Wales (Technical, Administrative and Professional Staff Branch); The Australian Rail, Tram and Bus Industry Union, New South Wales; Association of Foremen and Supervisors; Gas Employees' Union; Gas Industry Salaried Officers Federation, New South Wales Branch; and, Gramophone Records Industry Union of New South Wales. Mr J V Murphy of counsel for the Minister for Industrial Relations and the Public Employment Office. Mr T McDonald for Employers First and its affiliated organisations including the Bus and Coach Industrial Association of New South Wales, Master Builders' Association of New South Wales, Aged Services Association of NSW (Industrial) and for the Australian Retailers Association of New South Wales. LEGAL REPRESENTATIVES: Mr D Grozier for Australian Business Industrial and Furnishing Industry Association of Australia (Management Services), Australian Nursing Homes and Extended Care Association - New South Wales, New South Wales Soft Drink Association Country Division, New South Wales Glass and Glazing Association, Concrete Paviours' Association and Engineering Construction Laboratories Association. Ms V Paul for The Australian Industry Group New South Wales Branch, New South Wales Road Transport Association, Motor Traders' Association of New South Wales, Australian Catholic Commission for Employment Relations, Local Government Association of New South Wales and Shires Association of New South Wales, and the State Chamber of Commerce (Industrial Relations) Association. Mr R Tait for the Registered Clubs Association of New South Wales. JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: Wright J, President Walton J, Vice-President Harrison DP Boland J Redman C Tabbaa C Friday 6 June 2003 Matter No. IRC 2411 of 2003 STATE WAGE CASE 2003 Summons to Show Cause - Commission on its own initiative pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996. REASONS FOR DECISION OF THE COMMISSION [2003] NSWIRComm 174 Introduction 1 On 6 May 2003, the Commission issued a summons to industrial parties to appear before it to show cause why, after considering the decision of the Australian Industrial Relations Commission ("the AIRC") in the Safety Net Review – Wages, May 2003 Case, Print PR002003 ("the National decision"), the Commission should not take such action pursuant to Pt 3 of Ch 2 of the Industrial Relations Act 1996 ("the Act") as it may deem proper. 2 Part 3 of Ch 2 of the Act includes ss 50 and 52 which provide: 50 Adoption of National decisions (1) As soon as practicable after the making of a National decision, a Full Bench of the Commission must give consideration to the decision and, unless satisfied that it is not consistent with the objects of this Act or that there are other good reasons for not doing so, must adopt the principles or provisions of the National decision for the purposes of awards and other matters under this Act. (2) A Full Bench of the Commission is to give consideration to the National decision either on application or on its own initiative. (3) The principles or provisions of a National decision may be adopted: (a) wholly or partly and with or without modification, and (b) generally for all awards or other matters under this Act or only for particular awards or other matters under this Act. (4) The principles or provisions of a National decision so adopted may be varied by a Full Bench of the Commission, whether or not another National decision is made. 52 Variation of awards and other orders on adoption of National decisions or making of State decisions A Full Bench of the Commission may, when adopting the principles or provisions of a National decision or making a State decision, make or vary awards, or make other orders, to the extent necessary to give effect to its decision. 3 A "National decision" is defined in s 48 of the Act as: 48 What is a National decision? A National decision is a decision of a Full Bench of the Australian Industrial Relations Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction. 4 On 8 May 2003 Wright J, President made directions as to the conduct of the proceedings and the filing of evidence and submissions. Significantly, the President directed that the matter would be heard in Newcastle on 26 and 27 May 2003. In opening the proceedings in Newcastle, his Honour, on behalf of the Full Bench, observed: The Commission welcomes all present to the hearing of the State Wage Case 2003. This is the second State Wage Case Full Bench proceedings to be heard in Newcastle. On 19 May 1902 the New South Wales Court of Arbitration heard its first case. It was heard in the Newcastle Courthouse, less than a mile from where we are sitting today. The Industrial Relations Commission of New South Wales is the legal and practical successor of that Court and it is thus the longest continuing industrial tribunal and industrial court in Australia. Also, very significantly, it is the longest continuing industrial tribunal and industrial court in the world. The Commission celebrated its centenary just over a year ago. In this country we are living at a time of important centenaries. As well as this Commission's centenary, we all recall the celebrations to mark the centenary of Federation in 2001. The High Court celebrates its centenary in October this year and the federal Commission next year. We look forward to the celebration of the bi-centenary of Newcastle which also takes place next year. To mark the role of Newcastle and the Hunter Valley in the original sittings of the Court and thus the role of Newcastle and the Hunter Valley in the centenary of the Commission, a plaque was unveiled in the actual courtroom where the first sitting took place. A now very historic photograph of the original sitting showing the members of the Court and the advocates appearing on that occasion, is featured in the history of the Newcastle Branch of the Industrial Relations Society of New South Wales which was published last year under the title "Co-operation out of conflict - the foundation years of the Newcastle branch of the Industrial Relations Society of New South Wales". That publication was appropriately launched on the same day as the plaque was unveiled at Newcastle Courthouse. The decision to hold the State Wage Case in Newcastle this year was in part to mark the centenary and the important role of this city and this region in the 101 years of the Commission's work and achievements. As noted earlier, this is the second time the State Wage Case has been held in Newcastle. The first occasion was in 1999 when I said this: The decision to hold these proceedings in Newcastle reflects the significant contribution of the people and enterprises of Newcastle and the Hunter Valley to the State and national economy and to the development of industrial relations in New South Wales and Australia. It also recognises the importance of the region in the work of the Commission itself. This sitting also recognises the important contribution to the Commission's activities made by the industrial parties in the region and by the members of the Commission who regularly sit in Newcastle - Deputy President Harrison and Commissioner Redman … What was said there continues today. 5 A further matter of significance is that whilst there was some reservations expressed (particularly by employer parties), about the size and impact of the increases awarded by the Australian Commission, it was accepted by all of the parties to the proceedings that this Commission should adopt the increases awarded by the AIRC. The parties, of course, included the State peak councils for employees and employers, the Minister for Industrial Relations and the Public Employment Office. Moreover, no party proposed any change to this Commission's Wage Fixing Principles except in so far as it was necessary to give effect to the adoption of the National decision. Decision Delivered on 27 May 2003 6 On 27 May 2003 the Full Bench announced in Newcastle its decision accompanied by a brief statement of reasons. It was indicated that full reasons would be provided in due course. We now publish our reasons for decision. The Australian Industrial Relations Commission's Decision 7 In its Safety Net Review – Wages, May 2003 decision, the AIRC considered a claim brought by the Australian Council of Trade Unions ("the ACTU"). The ACTU's claim sought a $24.60 per week increase in all federal award wage rates with a commensurate increase in wage-related allowances. 8 The Governments of the States of New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania and the Australian Capital Territory and Northern Territory supported an increase of $18.00 per week in the minimum wage and all minimum award rates. 9 The Commonwealth Government opposed the ACTU's claim and proposed a "moderate increase of up to $12.00 per week in the award rates of the low paid" subject to the following qualifications: (a) in order to represent a genuine safety net adjustment, it must only be available to award rates up to and including the equivalent of the tradesperson's rate - C10 in the Metal Industries Award - currently $525.20 per week; (b) it must apply until the next Safety Net Review and be fully absorbed into all above award payments including from enterprise and informal over-award agreements; and (c) there must be a twelve month gap between the increase awarded by the Commission in its 2002 decision and any increase decided in this case. The Commonwealth submitted that if the AIRC were to consider awarding an increase of more than $12.00 per week in the safety net rates, then such an increase should be phased in over not less than 18 months. 10 As the AIRC observed in its decision, all employer organisations and associations represented opposed the ACTU's claim and most argued that there should be no increase to safety net rates. The Australian Chamber of Commerce and Industry (ACCI) submitted that there should be no increase at this time. In the alternative, it submitted that if the Commission awarded an increase it should be moderate, confined to lower level classifications and should operate for a period of 18 months. In the further alternative, any increase should operate for no less than 12 months. The Printing Industries Association of Australia also opposed the ACTU's claim. It contended that the claim should be rejected but submitted in the alternative that "if any increase is contemplated it should be modest and confined to the genuinely lower paid". 11 The Australian Industry Group, Engineering Employers Association, South Australia and the Master Plumbers' and Mechanical Services Association of Australia supported an increase of $11 per week to award rates of pay, subject to the principle of absorption. The Australian Catholic Commission for Employment Relations supported an increase of the amount claimed by the ACTU to the federal minimum award wage. Other employers bodies opposed any increase. 12 In determining any application of the nature of the ACTU's claim, the Australian Commission is bound to have regard to "economic factors, including levels of productivity and inflation, and the desirability of attaining a high level of employment". In its decision the Australian Commission dealt extensively with: · current economic conditions, including indicators of recent past economic activity and the immediate economic outlook; · estimates of the cost of the ACTU wage claim; · the likely economic impact of the claim; and · the needs of the low paid and living standards generally. 13 After reviewing aggregate economic data the AIRC concluded: The Australian economy has continued to grow strongly over the course of 2002. The non-farm economy has maintained growth in the order of 4 per cent per annum, whilst the level of growth in total has eased to 3.2 per cent in the year to the December quarter 2002, reflecting the significant fall in farm activity in the last half of 2002 as a result of drought conditions. Private sector business investment growth has been very strong, with dwellings investment remaining strong, although easing, throughout the course of 2002. The continued healthy growth has been reflected in reasonably strong labour market outcomes, with both full-time and part-time employment growing and unemployment falling in 2002 and into 2003. Inflation and wages growth remain moderate. Significant productivity growth has been recorded. Profits measured by gross operating surplus grew and the profit share of GDP remains at historically high levels. 14 In relation to the immediate economic outlook, the Australian Commission concluded that it was positive: [W]ith official forecasts suggesting the continuation of strong growth in economic activity and further steady inroads into unemployment in the context of further moderate wages and prices growth. Continued productivity growth and private business investment is anticipated. 15 The Australian Commission indicated that it was conscious of the economic risks associated with the ACTU's claim and had paid regard to them in determining the claim, but that it was not appropriate to assume that the risks would materialise. This was so, the Australian Commission said, for the following reasons: Firstly, the risks identified have been incorporated to some degree into the formulation of the MYEFO [Mid-Year Economic and Fiscal Outlook] forecasts. For example, the MYEFO commentary contrasts the solid growth prospects for Australia, reflected in the forecasts, with "the weak and uncertain outlook for the global economy". The commentary notes that the main domestic risks to Australia's economic outlook - the drought and the prospect of a downturn in the housing cycle - "by themselves are unlikely to significantly derail the broader economy". The possibility of a further deterioration in the global economy, whilst bringing risks, is thought to be "not the most likely outcome". The MYEFO outlook reflects a view that "the most likely outcome is that supportive policy settings will underpin a gradual, albeit weaker than previously expected, strengthening of global economic conditions over the next year", with the forecast for world growth already reduced by 1/2 per cent since Budget time. On the domestic front MYEFO forecasts, whilst assuming a return to more normal seasonal conditions, have incorporated the effect of the drought to date, both on the farm sector and the broader economy. Secondly, the underlying strength of the Australian economy has placed it in a strong position to cope well with risks and shocks. This has been evident in the past with the rapid return to the path of strong, non-inflationary growth following the transitional effects of the introduction of the GST in 2000, and the capacity of the Australian economy to deal with the economic crisis in East Asia in 1997 and associated financial instability. The resilience of the Australian economy was noted in the OECD Economic Outlook for Australia in these terms: Dogged pursuit of structural reforms across a very broad front, and prudent macroeconomic policies firmly set in a medium-term framework, have combined to make the Australian economy one of the best performers in the OECD, and also one notably resilient to shocks, both internal and external. Incomes growth has remained brisk, employment is expanding, inflation is under control, and public finances are healthy. All the indications are that the continuing effects of previous reforms will continue to help the economy to combat shocks in the immediate future. Thirdly, we do not believe that the low paid should carry the full burden of the uncertainties. We think the correct approach, adopted in the formulation of official forecasts, is to be conscious of risks but not to assume the realisation of the worst case. In this respect the MYEFO commentary notes the potential downside risk for the Australian economy which would arise from the confluence of a further decline in global economic activity, a greater than anticipated effect of the drought on the economy and an expected downturn in housing activity. It also notes that the Australian economy has proved to be very resilient, underpinned by solid fundamentals and supportive policy settings and that a near-term stabilisation in the external outlook, particularly of financial markets and the level of geo-political tensions, could see the Australian economy grow more strongly than forecast. In our view it is appropriate to have regard to the present uncertainties and risks which might affect the Australian economy. We think it inappropriate, in assessing the capacity to better address the needs of the low paid, to assess economic uncertainties and risks on the basis of a worst case outcome. Nonetheless, we accept the need to have regard to those risks and uncertainties, within the context of a broader range of considerations, when determining the present claim and we have done so. 16 As to the cost of the ACTU's claim the Australian Commission concluded that: The aggregate cost of the ACTU's claim will be less than that arising from its claim in 2002 because the dollar increase sought is smaller, the dollar increase applies to a higher level of award wages and the proportion of employees reliant on award increases is smaller as a result of the continuing spread of enterprise bargaining. The ACTU and Commonwealth estimates of the gross direct impact of the ACTU's claim on aggregate earnings are broadly similar - in the range of 0.42-0.53 percentage points. Taking into account the fact that the 1995 Australian Workplace Industrial Relations Survey (AWIRS) and the 1999 AACS [Award and Agreement Coverage Survey 1999] suggest that not all employees classified by survey respondents as award reliant benefit from safety net increases, we remain of the view that estimates based on data for award reliant employees might be better described as showing the potential cost impact, rather than the actual impact. Further, in assessing the impact of safety net increases on aggregate wages growth, it is appropriate to note that current aggregate earnings growth partly reflects the effect of the 2002 adjustments. Accordingly, in assessing the likely impact of the proposals currently before us against present levels of relevant economic indicators, it is appropriate to consider the net impact on aggregate wages growth. We think the estimate of 0.1 percentage points direct net addition to aggregate wages growth is broadly indicative of the cost of the ACTU's claim. Increases at the level between those awarded in 2002 and the ACTU's claim would result in roughly proportionate net additions to aggregate wages cost. 17 The Australian Commission considered the economic effects of safety net adjustments on employment, wages growth, inflation and productivity. In relation to employment effects, the AIRC concluded: · a general assessment of employment data, including a focus on more heavily award reliant sectors, does not disclose any basis to suggest that past safety net adjustments have had significant adverse employment effects; · there remains a continuing controversy amongst academics and researchers as to the employment effects of minimum wage improvements. As noted by the UK Low Pay Commission the research undertaken often produces conflicting results; · the various studies do not establish that moderate increases in the minimum wage, of themselves, will diminish aggregate employment effects; · whilst there is no automatic relationship between the two, real wage growth can adversely affect aggregate employment growth. The extent of such effect will depend upon the prevailing economic circumstances and the extent of the real wage movement; · in respect of the modelling undertaken by the Commonwealth, consideration of the net impact on aggregate wages costs of the ACTU's claim, absent a monetary policy response through increased interest rates, suggests a very limited impact of the ACTU's claim on economic growth and employment; · the ACCI, AiG and Retail Motor Industry surveys provide no data as to the magnitude of employment effects and the results in relation to the proportion of firms reporting particular effects should be treated with some caution. The surveys do, however, support a conclusion that there are employment effects of safety net increases with respect to some employers, such effects operate differentially and adverse employment effects are more evident in relation to those employers directly affected by safety net increases; · the likelihood of some adverse effect of award increases on some employers is a relevant consideration to be balanced within the range of considerations relevant to the determination of the claims before us; · safety net increases will impact differently on different sectors of the economy and on different enterprises; and · the limited addition to aggregate wages costs associated with our decision will not have a significant real wages effect. In the context of strong productivity growth, and in the absence of any factor share imbalances, we think it is unlikely to cause dislocation to labour market outcomes. 18 In relation to wages growth and inflation, the AIRC considered that the increase it had determined would not lead to an acceleration of aggregate wages growth or inflation. As to productivity, the Australian Commission concluded the safety net adjustments awarded would not constrain productivity growth. 19 In its conclusions on economic considerations the AIRC stated: As we have concluded earlier, over the past year the Australian economy has continued to grow strongly, notwithstanding a moderation in growth resulting from the effects of the drought on rural production. The non-farm sector has continued to grow at 4 per cent per annum. Historically high productivity growth has continued. Labour market performance has improved and private sector investment has been exceptionally strong. Net export performance has been weak. The immediate economic outlook, reflected in official forecasts, remains positive. Those forecasts suggest the continuation of strong, non-inflationary growth. There are, however, some uncertainties which present risks, most notably any delay in the passing of drought conditions and possible further weakening in the global economy, with uncertainty as to the impact of the Iraq conflict. Whilst we think it inappropriate to assume the worst possible outcome in respect of these uncertainties and risks, we have given weight to those uncertainties amongst other matters in determining the ACTU's claim. The aggregate cost of the ACTU's claim will be less than that arising from its claim in 2002 because the dollar increase sought is smaller, the dollar increase applies to a higher level of award wages and the proportion of employees reliant on award increases is smaller as a result of the continuing spread of bargaining. The gross direct aggregate addition to labour costs of the ACTU's claim would be in the order of 0.4 to 0.5 percentage points and the net impact, having regard to the continuing effect of the 2002 safety net adjustment, is in the order of 0.1 percentage points. Any indirect cost will be limited. Any impact of our decision will be less than that associated with the ACTU's claim. A broad assessment of employment data, including a focus on more heavily award reliant sectors, does not disclose any basis to suggest significant adverse employment effects of past safety net adjustments. The modelling undertaken by the Commonwealth suggests the ACTU's claim would have a very limited impact on economic growth and employment. However, we recognise that safety net increases will impact differently on different sectors of the economy and on different enterprises. The likelihood of some adverse effect of award increases on some employers is a relevant consideration to be balanced within the range of considerations relevant to the determination of the claims before us. The limited addition to aggregate wages costs associated with our decision will not have a significant real wages effect. In the context of strong productivity growth, and in the absence of any factor share imbalances, we think it is unlikely to have adverse aggregate employment effects. In our view, the Australian economy can accommodate further reasonable improvements in the safety net of minimum wages of the level we determine in this decision. 20 In having regard to the needs of the low paid, the AIRC rejected a call by the Australian Catholic Commission for Employment Relations and the Australian Council of Social Service for an inquiry into the needs of the low paid in order to ascertain an appropriate benchmark for the adequacy of the federal minimum wage. In that respect the Australian Commission noted that the Senate Community Affairs References Committee was currently conducting an inquiry into poverty. The Commission also noted: The role of the tax-transfer system (generally referred to as the social wage) in reducing inequality and assisting the low paid was also a feature of a number of the submissions in these proceedings, as was the case in last year's proceedings. In this context the social wage encompasses the system of cash transfer payments, the taxation system and the provisions of indirect benefits such as Medicare and the education system. 21 Whilst acknowledging that safety net increases are an imperfect and partial mechanism for addressing the needs of the low paid the Commission stated, however, that: The variation of awards to provide wage increases is the only tool available to the Commission to address the "needs of the low paid" in the "context of living standards generally prevailing in the Australian community" and having regard to economic considerations. Accordingly, and subject to proper consideration of the matters specified in the Act, the Commission must utilise that tool from time to time notwithstanding the fact that it is an imperfect and partial mechanism for addressing the needs of the low paid. If the Commission was presented with alternative proposals that more effectively addressed the needs of the low paid this may enable the object of maintaining a safety net of fair minimum wages to be achieved in a way that better balances meeting the needs of the low paid with the economic considerations and is more beneficial to the national economy. 22 The Australian Commission decided to award a tiered increase that would provide a slightly higher increase for employees at the lower levels. The amounts decided upon were: 1. a $17 per week increase in award rates up to and including $731.80 per week; and 2. a $15 per week increase in award rates above $731.80 per week. 23 In awarding the increases the AIRC noted: The form of the increase gives appropriate emphasis to the needs of the low paid whilst moderating the overall economic impact by providing a lower amount at the higher classification levels. While this tiered approach tends to reduce wage dispersion it also tends to distort relativities. Nevertheless the difference between the two amounts and the point in the salary scales at which the second tier cuts in mean that the effect on relativities, compared with a uniform increase, will be minimal. 24 In relation to operative date, the AIRC decided that except where permitted by its Statement of Principles, the adjustment provided for in the decision would be available from a date no earlier than 12 months after the increase provided for in the May 2002 decision. Implementation of the adjustments was made subject to the following conditions: (a) the increase will be fully absorbable against all above-award payments; (b) except where permitted by the Statement of Principles, the increases will be available from a date no earlier than 12 months after the increases provided for in the May 2002 decision in the award in question; (c) the commencement of award variations to give effect to this decision will be no earlier than the date on which the award is varied, with phasing-in of increases permissible where circumstances justify it. Any application for phasing-in will be subject to Principle 10; (d) by consent of all parties, and where the minimum rates adjustment has been completed, award rates may be expressed as hourly rates as well as weekly rates; in the absence of consent, a claim that award rates be so expressed may be determined by arbitration; and (e) allowances which relate to work or conditions which have not changed and service increments are to be varied; the method of adjustment is to be consistent with the Furnishing and Glass Industries Allowances Decision . 25 The federal minimum wage was increased by $17.00 to $448.40 per week. 26 The Australian Commission noted that none of the parties sought any significant change to the substance of the existing Principles, although a number of the parties suggested qualifications to the operation of Principle 12 and proposals for the inclusion of statements of clarification about the intended operation of other principles. The AIRC declined to make any changes to its Principles. Submissions 27 In giving consideration to the National decision, s 50 of the Act provides that unless we, as a Full Bench, are satisfied that it is not consistent with the objects of the Act or that there are other good reasons for not doing so, we must adopt the principles or provisions of the National decision for the purposes of awards and other matters under this Act. 28 It was noted earlier in this Decision that, whilst the employer parties expressed some reservations about flowing on the increases awarded in the National decision, they accepted that such a flow on should occur. Further, no party sought changes to the Commission's Wage Fixing Principles other than those necessary to reflect the National decision. This consensus, albeit slightly qualified, must carry with it significant weight in any consideration as to the appropriateness of adopting the National decision. 29 Regardless of the consensus, however, in exercising its functions under the Act the Commission must take into account the public interest and for that purpose, pursuant to s 146(2) of the Act, must have regard to the state of the economy of New South Wales and the likely effects of its decision on that economy. The Labor Council of New South Wales 30 Mr M Gadiel with Mr E Razborsek appeared for the Labor Council. Mr Gadiel submitted that the preferred position of the Labor Council would have been for the Commission to grant the ACTU's $24.60 per week increase in all award rates with a commensurate increase in wage-related allowances. However, on this occasion he contended that the wage increases awarded in the National decision should be adopted in New South Wales. 31 Mr Gadiel submitted the economic position of New South Wales was as strong as the national economy and was, therefore, in a position to afford the wage increases as provided for in the National Decision. In making this contention he relied on the material presented by the Minister for Industrial Relations and the Public Employment Office. Additionally, Mr Gadiel referred to The Federal Budget Papers released on 13 May 2003 and in particular Paper No. 1, Part 3, Statement 3 – Economic Outlook, which stated: In 2003-04, the Australian economy is forecast to grow by 3.25 per cent in year-average terms. Slower growth in non-farm production is expected to be more than offset by a rebound in farm production. The solid outlook comes after another year in which the extraordinary resilience of the Australian economy has been demonstrated. This resilience – a consequence of sustained economic reforms – helped deliver solid growth despite a weak global economy and a very severe drought. GDP growth is forecast to be 3 per cent in 2002-03, unchanged from the forecast present in MYEFO. The drought is forecast to directly subtract nearly 1 percentage point from GDP growth in 2002-03, with non-farm GDP growth forecast to be 4 per cent. … Wages growth is expected to be well contained in 2003-04, gathering pace a little in coming months in line with the recent tightening in labour market conditions, but steadying thereafter in line with the more subdued employment outlook and a steady unemployment rate. Average earnings on a national accounts basis are expected to grow by 4 per cent in 2003-04. ….. Nevertheless, with inflation moderate, inflation expectations well in check, and labour market conditions unlikely to tighten much through the course of 2003-04 wage pressures generally should remain contained. With productivity growth expected to be solid, overall growth in labour costs should remain subdued. 32 Mr Gadiel further submitted that: [W]hile there are weaknesses in the global economy – the National and State economies have significantly withstood these pressures. The Labor Council acknowledges the pressure on the National and State economies as a result of the current drought. However, we contend that in making the National Decision the Australian Industrial Relations Commission took adequate account of these factors. 33 In relation to the low paid Mr Gadiel referred to what the Australian Commission said at par [197] of its decision: It is apparent from their evidence that the witnesses struggled to make ends meet. A significant proportion of their expenditure is on necessities and unexpected expenditures are difficult to finance. There were a number of things which the witnesses went without, for example: regular holidays; social outings; repairing/replacing household appliances; new clothes; insurance; and dental treatment. And further at par [201]: It is generally acknowledged, and we accept, that many low paid employees experience difficulties in making ends meet and are unable to afford what are regarded as necessities by the broader Australian community. 34 In relation to the issue of lagging awards Mr Gadiel submitted: 1. Further to the decision of the Full Bench in the State Wage Case May 2002 … the Labor Council received a list from the Registry of awards which had not received the 2002 State Wage Case Adjustment as at 31 December 2002. 2. The Labor Council has sought advice from its affiliates and has provided a detailed list of explanation relating to the awards which had not received a State Wage Case adjustment from the 2002 decision as at 31 December 2002. 3. The list prepared by the Labor Council is attached hereto and shows a total of thirteen (13) awards which are now "lagging", i.e. they are yet to receive the 2002 State Wage Case adjustment. The list gives explanations as provided by the Labor Council's affiliates as to the reason for the "lag". 4. It is the intention of the Labor Council to continue to monitor the implementation of State Wage Case adjustments in all awards over the next 12 months and should the Labor Council feel it necessary, an application may be brought in the course of the State Wage Case 2004 seeking to deal with the issue of "lagging awards". Employers First and the Australian Retailers Association, New South Wales 35 Mr T McDonald appeared for Employers First and its affiliated organisations and Australian Retailers Association, New South Wales. Mr McDonald submitted the increases awarded by the National Decision were too high, particularly when there are no efficiency gains or offsets in return for these increases. He submitted that the slower economic growth referred to by ACCI in the proceedings before the Australian Commission had been more marked in NSW than nationally and that of particular concern has been the impact upon employment. 36 Mr McDonald noted in the NSW Government's submission that while NSW state demand was expected to grow, the growth would be largely offset by much faster growth in imports and the impact of the drought and weak global economy which has reduced exports. He said that the drought and the weak global economy continued to pose a major threat to the NSW economy. Further, while the Labor Council argued that long range weather forecasts suggested there may be a chance of rainfall in some parts of NSW, the chances of such rainfall are "estimated to only be around the 50:50 mark". 37 Mr McDonald said that while it is hoped that the weakness of the global economy would improve this year, such an improvement was not yet evident and this outlook was being tempered by a number of risks. 38 Nonetheless, Mr McDonald submitted: While not resiling from these concerns in considering the adoption of the National decision, we recognise the imperatives of section 50 of the Act and, therefore, do not oppose the adjustments arising from the decision. 39 Mr McDonald indicated that Employers First agreed with the Labor Council that increases to wages and allowances should only be available upon application rather than by general order and that there should be no change to the principles in relation to lagging awards or industry settlements. Australian Business Industrial 40 Mr D Grozier appeared for ABI. Mr Grozier submitted that the increases awarded by the AIRC were too high especially coming after last year's increase of $18.00. He said that the National decision meant that most federal award wages would increase by $35.00 in one year or just over one year. This is an increase of 8.5 per cent to the adult minimum rate and a significant real increase. There have been no offsets for productivity for this increase. Notwithstanding these reservations Mr Grozier submitted, having regard to s 50 of the Act, the AIRC decision and, economic circumstances, there was not sufficient reason to depart from the National decision. 41 Mr Grozier informed the Commission that since the handing down of the National decision the Commonwealth budget had been announced. He said that according to the 2003-4 Commonwealth Budget Papers "…global economic growth is expected to continue to be subdued in a highly uncertain environment, with risks being predominantly on the down side". In relation to the domestic economy the Budget Papers stated that "…on balance, with solid fundamentals and supportive policy settings, the most likely outcome is that Australia's economy will continue to grow solidly despite the weak international backdrop, particularly if a gradual world recovery proceeds as expected. Nevertheless, the real and significant risks to Australia's growth prospects should not be discounted". 42 Mr Grozier observed that the NSW economy accounts for more than a third of the total Australian economy and employs about a third of the total Australian workforce. The NSW economy is also quite diverse. He said that whilst its size, diversity and similarity to the overall Australian economy would generally ensure that general conditions in the NSW economy differ little from general conditions in the Australian economy, this was not always the case. 43 After reviewing a number of leading economic indicators relevant to the State's economy, Mr Grozier concluded: There have been some changes in our picture of the economy and forecasts since the National decision. The Treasury has scaled back its 2003-2004 growth forecast by ¾% from the 4% before the AIRC. 4% growth compares with 3% in 2002-2003. The overall rate of unemployment still continues to be unacceptably high, and is not forecast to decline in 2003-2004, although Treasury forecasts anticipate continuing growth in employment numbers in 2003-2004, albeit at a slower rate than in 2002-2003. Employment figures and forecasts are a little less encouraging than at the time of the National decision and in NSW full time and male employment are not faring as well as in the rest of Australia. Conversely women's employment is performing better in NSW than in the rest of Australia. In its National decision the federal Commission took account of the risks and uncertainties facing the Australian economy in determining what it would award and concluded that on its analysis there would be little adverse aggregate employment impact. Differences in expected business investment between NSW and the rest of Australia are slight, once the effect of predicted mining investment is accommodated. Overall Budget paper predictions contemplate that the Australian economy will continue to grow solidly against a backdrop of real risks to those prospects. National figures now available and differences between the Australian and NSW economy do not provide sufficient reason to depart from the increases awarded in the National decision. Australian Industry Group and other employer bodies 44 Ms V Paul appeared for the Australian Industry Group, New South Wales Branch (AiGroup), New South Wales Road Transport Association, Motor Traders' Association of New South Wales, Australian Catholic Commission for Employment Relations, Local Government Association of New South Wales and Shires Association of New South Wales, and the State Chamber of Commerce (Industrial Relations) Association. Consistent with the position taken by Employers First and ABI, AiGroup and the other employer bodies it represented did not object to the adoption of the National decision. 45 Ms Paul referred to AiGroup's submissions before the Australian Commission which, of course, were considered in some detail by that Commission, especially in relation to the survey material going to the impact of the 2002 safety net decision and AiGroup's submission going to the interrelationship between potential wage increases and the income tax and income support systems for low income households. We consider the Australian Commission dealt with that material appropriately and we have nothing further to add. The Minister for Industrial Relations and PEO 46 Mr J V Murphy of counsel appeared for the Minister for Industrial Relations and the Public Employment Office. Mr Murphy informed the Commission that in the proceedings before the Australian Commission, State and Territory Governments asked the AIRC to grant an increase of $18.00 per week in the minimum wage and all minimum award rates. He said the State and Territory Governments submitted that $18.00 was a sustainable amount, and reasonable based on the current state of the economy as well as the need to establish a balance between economic concerns and the needs of low paid workers. 47 Mr Murphy contended that the submission of the State and Territory Governments adopted a responsible position concerning the ACTU claim, paying careful regard to Australia's continued economic wellbeing. In deciding to support an increase of $18.00 per week, due emphasis was given to reaching a balance between the economic factors and the needs of the low paid and in so doing, the importance of maintaining a viable and fair award system. 48 Notwithstanding the position taken by New South Wales before the Australian Commission, Mr Murphy submitted that it was appropriate for this Commission to flow on the increases awarded in the National decision. 49 In relation to the New South Wales economy it was submitted that: [S]tate demand growth has firmed in fiscal 2002-03 to date, with consumer spending, housing investment and business investment all exhibiting strong growth. State Gross State Product, however, is expected to be little changed from 2001-02, largely reflecting the impact of the drought and a weak world economy. The NSW economy currently broadly exhibits the same strengths and weaknesses as the Australian economy. It is expected that as the performance of the two economies is so similar, the AIRC's decision flowing on to State awards could be absorbed. 50 Mr Murphy's written submissions provided a detailed review of the state of the New South Wales economy and covered: the economic performance and outlook; components of growth; consumption; dwelling investment; business investment; tourism; prices and wages; the labour market; and, the economic impact of flowing on the increase on government employment. The submissions included comparisons of key economic indicators for the Australian and New South Wales economies and in most cases these comparisons showed New South Wales closely tracking the overall economy. 51 In summarising his economic submissions Mr Murphy said: The softer economic performance in New South Wales than in the rest of Australia in 2001-02 may reflect the greater exposure of the State's economy to the technology, business services, finance and telecommunications sectors, all of which experienced difficulties globally last financial year. In 2002-03 to date, however, the New South Wales economy has performed well, notwithstanding the severe drought and has broadly matched the national performance. Hopes for a speedy and strong recovery in the United States economy after a very short and shallow downturn no longer seem likely, as the US economy now seems to be floundering with continued high unemployment, weak business investment and more recently, weakening consumer demand. An extremely large current account deficit, over priced share markets, and excess capacity are also hindering a speedy economic recovery in the United States. Nor can one rule out the possibility that the spread of the SARS epidemic will disrupt economic growth in a number of other countries, and slow the growth of world trade. Since 1997, however, the Australian economy has proved to be extremely resilient in the face of adverse economic conditions abroad. It is not unreasonable to expect that to continue to be the case. 52 In concluding his submissions Mr Murphy said: Given the generally favourable economic conditions, and lack of evidence to suggest any negative impact from the 2002 safety net adjustment, the decision of the AIRC to award an increase gives appropriate emphasis to the needs of the low paid and is economically responsible, sustainable and justified. Given that the increase can be absorbed by the New South Wales economy, because the performance of the state's economy is so similar to the Australian economy, broadly exhibiting the same strengths and weaknesses, and in the interests of comity between wage outcomes in this jurisdiction and the Federal jurisdiction, the AIRC decision must now be applied in the New South Wales jurisdiction. The Commission's Reason for Decision 53 We are satisfied that the Australian Commission's Safety Net Review-Wages May 2003 is a "National decision" as defined by s 48 of the Act which the Commission is required to consider in accordance with the provisions of s 50. Wage Increase 54 The Australian Commission decided to award an increase of $17.00 per week for award wages up to and including $731.80 per week and $15.00 per week for award wages above $731.80 per week. Section 50(1) of the Act requires us to adopt the National decision unless we are satisfied that it is inconsistent with the objects of this Act or that there are other good reasons for not doing so. Having regard to the quantum of and reasons for the Australian Commission's decision, the adjustment in wages arising from the National decision is not inconsistent with the objects of the Act. 55 We have had regard to the helpful economic submissions. Whilst there were reservations on the part of employers about the implications for the New South Wales economy of the drought and the prospect of a weaker global economy, it was generally acknowledged that the State's economy broadly exhibits the same strengths and weaknesses as the national economy. The economic material confirms this to be the case. Although there was some disquiet on the part of employers about the size of the increases awarded by the AIRC, it was not considered to be at such a level as to cause them to oppose a flow on of the increases to employees under New South Wales Awards. 56 We have obviously also had regard to the Australian Commission's detailed consideration of the economic and socio-economic material and we can see no basis for arriving at any different conclusions in respect of that material in so far as it is relevant to our consideration in these proceedings. 57 In the result, and having regard to the fact there was no opposition, we have decided to adopt the National decision as to the quantum of the wage adjustment. Lagging awards 58 In the State Wage Case 2002 (2002) 114 IR 82 the Full Bench of the Commission made the following observations regarding lagging awards at pars [72], [73] and [74]: 72 In our view, no proper basis has been established for the retention of Principles 8(g) and (h). Upon the material before us, it would appear that the principles have essentially served their purpose. Any residual issue (such as may exist) should be dealt with in special case proceedings. 73 Successive Full Benches in State Wage Case proceedings have sought the assistance of the parties as to the position of 'lagging awards'. The Commission has been consistently deprived of that information which was vital to a proper assessment of the extent of any lag in the introduction of State Wage Case adjustments in awards (see, for example, State Wage Case 2001 at [126]). 74 In order to properly deal with that question in future State Wage Case proceedings, we intend to issue directions which shall have the effect of providing the requisite information and ascertaining plainly whether any issue of that kind may properly be ventilated in State Wage Case proceedings. 59 In accordance with the directions made by the Full Bench in that decision at [75]) on 30 January 2003, the Industrial Registrar issued to parties appearing in the matter a list of awards which, as at 31 December 2002, had not received: (a) A wage adjustment arising from the State Wage Case 2002; or, (b) A State Wage Case adjustment for a period exceeding 18 months. 60 The list prepared by the Industrial Registrar included 557 awards. In response to that document the Labor Council undertook a survey of its affiliates as to the status of awards shown on the list. The Labor Council then filed a document titled "SWC 2002 - Lagging Awards" which recorded the results of the survey and provided further relevant information regarding the awards on the list. 61 As earlier mentioned, the survey conducted by the Labor Council ultimately demonstrated that 13 awards had not received a wage adjustment by 26 March 2003. It will be evident that this number of awards was considerably less than the list prepared by the Registrar. Mr Gadiel explained this differential by reference to the 'absorption principle', that is, a large number of awards appearing in the Registrar's list did not attract the State Wage Case 2002 adjustment because of the operation of that principle. 62 In his oral submissions, Mr McDonald for Employers First contended that the Labor Council's list did not understate the extent of lagging awards and, further, that the explanation given for the limited number of awards identified by the Labor Council was accurate. He also submitted that the number of awards not in receipt of the State Wage Case 2002 increase was small. 63 On the material before us, we do not consider that there presently exists any lag in the introduction of State Wage Case adjustments for awards as would warrant any variation to the Principles or the making of directions, in that respect, akin to orders made in the State Wage Case 2002. Where a particular concern arises as to a 'lagging award' in the future it may be considered in accordance with the Special Case Principle. 64 In any event, if any party seeks a variation to the Principles regarding 'lagging awards' or the '12 months rule' (to the extent applicable), they should take the following steps: 1. A communication in writing should be sent to the Industrial Registrar (with service of such notice upon the parties to the proceedings) by 1 March 2004. That notice should specify the variation to the Principle proposed; 2. By 1 April 2004, that party should file and serve contentions in support of the proposed variation. The Principles 65 There were no other material differences between the parties as to the terms of the Wage Fixing Principles. The parties agreed upon the necessary minor alterations to the Principles consequent upon the adjustment in the wages awarded. Whilst the Principles we propose differ in a number of respects from those determined by the Australian Commission, we consider that there are good reasons for the modifications that have previously been adopted and retained. The Principles we adopt are set out in Annexure B. Orders 66 The Commission made the following orders on 27 May, 2003 when sitting in Newcastle: (1) Pursuant to s 50 of the Industrial Relations Act 1996, the Full Bench of the Industrial Relations Commission of New South Wales orders, for the purpose of awards and other matters under the Act, the adoption, partly and with modifications as contained in the decision and reasons of the Full Bench, of the principles and provisions of the National decision of 6 May 2003. (2) Pursuant to order 1, the Commission orders that the Commission's Wage Fixing Principles shall be as set out in Annexure B. (3) Pursuant to s 52 of the Act, the Commission orders that awards that do not contain wage increases awarded since 29 May 1991, other than safety net, State Wage Case and minimum rates adjustments, may be varied in accordance with the Commission's Wage Fixing Principles upon application to include a State Wage Case adjustment of: (a) $17.00 per week for award wages up to and including $731.80 per week and (b) $15.00 per week for award wages above $731.80 per week. At the hearing of any such application, the Commission may, in its discretion, award the whole or part of the amounts referred to in the Principles or determine that no amount should be awarded. (4) Pursuant to s 52 of the Act, the Commission orders that the following rates may be increased by 3.2 per cent upon application in accordance with the Commission's Wage Fixing Principles: (i) existing allowances which relate to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments; and (ii) junior rates expressed as monetary amounts. Counterpart awards should be adjusted by the same amount as their federal award counterparts. (5) These orders shall operate on and from today until further order of the Commission. Annexure A - Appearances at the Hearing Mr M Gadiel with Mr E Razborsek for the Labor Council of New South Wales; Australian Workers' Union of New South Wales (Technical, Administrative and Professional Staff Branch); The Australian Rail, Tram and Bus Industry Union, New South Wales; Association of Foremen and Supervisors; Gas Employees' Union; Gas Industry Salaried Officers Federation, New South Wales Branch; and, Gramophone Records Industry Union of New South Wales. Mr J V Murphy of counsel for the Minister for Industrial Relations and the Public Employment Office. Mr T McDonald for Employers First and its affiliated organisations including the Bus and Coach Industrial Association of New South Wales, Master Builders' Association of New South Wales; and Aged Services Association of NSW (Industrial) and for the Australian Retailers Association of New South Wales. Mr D Grozier for Australian Business Industrial and Furnishing Industry Association of Australia (Management Services), Australian Nursing Homes and Extended Care Association - New South Wales, New South Wales Soft Drink Association Country Division, New South Wales Glass and Glazing Association, Concrete Paviours' Association and Engineering Construction Laboratories Association. Ms V Paul for The Australian Industry Group New South Wales Branch, New South Wales Road Transport Association, Motor Traders' Association of New South Wales, Australian Catholic Commission for Employment Relations, Local Government Association of New South Wales and Shires Association of New South Wales, and the State Chamber of Commerce (Industrial Relations) Association. Mr R Tait for the Registered Clubs Association of New South Wales. Annexure B - Wage Fixing Principles INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES STATE WAGE CASE 2003 WAGE FIXING PRINCIPLES 1 Preamble These principles have been developed with the aim of providing for their period of operation, a framework under which all concerned - employers, workers and their unions, governments and tribunals - can co-operate to ensure that measures to meet the competitive requirements of enterprises and industry are positively examined and implemented in the interests of management, workers and, ultimately, Australian and New South Wales society. In exercising its powers and obligations under the Industrial Relations Act 1996 ('the Act'), the Commission will continue to apply structural efficiency considerations, including minimum rates adjustments provisions. Movements in wages and conditions must fall within the following principles. 2 When an Award may be Varied or Another Award Made Without the Claim Requiring Consideration as a Special Case In the following circumstances an award may, on application, be varied or another award made without the application requiring consideration as a special case: (a) to include previous State Wage Case increases in accordance with Principle 3; (b) to incorporate test case standards in accordance with Principle 4; (c) to adjust allowances and service increments in accordance with Principle 5; (d) to adjust wages pursuant to work value changes in accordance with Principle 6; (e) where the application is consented to by the parties it will be dealt with in terms of the Act; (f) to adjust wages for the State Wage Case 2003 in accordance with Principle 8; (g) to approve of an enterprise arrangement reached in accordance with Principle 11; and (h) to adjust wages pursuant to an application claiming that work has been undervalued on a gender basis in accordance with Principle 14. 3 Previous State Wage Case Increases Applications for increases available under previous State Wage Case decisions will be determined in accordance with the relevant principles contained in those decisions. 4 Test Case Standards Test case standards established and/or revised by a Full Bench of the Commission may be incorporated into an award in accordance with the Act. Where disagreement exists as to whether a claim involves a test case standard, those asserting that it does must make an application for a special case. 5 Adjustment of Allowances and Service Increments (a) Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect relevant changes in the level of such expenses. (b) Existing allowances which relate to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments, may be increased by 3.2 per cent for the State Wage Case 2003 adjustment. Counterpart State awards should be adjusted by the same amount as their federal counterpart. (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 of these principles. (d) New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses. (e) Where changes in the work have occurred or new work and conditions have arisen, the question of a new allowance, if any, will be determined in accordance with the relevant principles of these principles. The relevant principles in this context may be Work Value Changes or First Award and Extension to an Existing Award. (f) New service increments may only be awarded 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 of these principles. 6 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 or upgrading to a higher classification. In addition to meeting this test a party making a work value application will need to justify any change to wage relativities that might result not only within the relevant internal award structure but also against external classifications to which that structure is related. There must be no likelihood of wage leapfrogging arising out of changes in relative position. 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) In applying the Work Value Changes principle, the Commission will have regard to the need for any alterations to wage relativities between awards to be based on skill, responsibility and the conditions under which work is performed. (c) 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. (d) The time from which work value changes in an award should be measured is the date of operation of the second structural efficiency adjustment allowable under the State Wage Case 1989 . (e) 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. (f) Where the tests specified in (a) are met, an assessment will have to be made as to how that alteration should be measured in money terms. Such assessment will 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. (g) The expression ' the conditions under which the work is performed' relates to the environment in which the work is done. (h) The Commission will guard against contrived classifications and over-classification of jobs. (i) 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 of these principles, will not be taken into account under this principle. 7 Standard Hours In approving any application to reduce the standard hours to 38 per week, the Commission will satisfy itself that the cost impact is minimised. Claims for reduction in standard weekly hours below 38 will not be allowed. 8 State Wage Case Adjustments In accordance with the State Wage Case 2003 decision awards may, on application, be varied to include a State Wage Case adjustment of $17.00 per week for award wages up to and including $731.80 per week and $15.00 per week for award wages above $731.80 per week subject to the following: (a) The operative date will be no earlier than the date of the variation to the award. (b) That at least twelve months have elapsed since the rates in the award were increased in accordance with the State Wage Case 2002 decision. (c) In awards where the variation for a safety net adjustment arising from the 1999, 2000, 2001,2002 or 2003 State Wage Case decisions is by consent and does not result in an increase in the wage rates actually paid to employees or increase the wage costs for any employer, any applicable 12 months' delay between variations may be waived. (d) At the time when the award is to be varied to insert the State Wage Case adjustment (or a proportionate amount in the cases of part-time and casual employees, juniors, trainees, apprentices, employees on a probationary rate, employees on a supported wage or with permits under s125 of the Act), each union party to the award will be required to give a specific commitment as to the absorption of the increase. In particular, the union commitments will involve the acceptance of absorption of the adjustment to the extent of: (i) any equivalent overaward payments, and/or (ii) award wage increases since 29 May 1991 other than safety net, State Wage Case, and minimum rates adjustments. (e) The following clause must be inserted in the award: The rates of pay in this award include the adjustments payable under the State Wage Case 2003 . These adjustments may be offset against: (i) any equivalent overaward payments, and/or (ii) award wage increases since 29 May 1991 other than safety net, State Wage Case, and minimum rates adjustments. The above clause will replace the offsetting clause inserted into awards pursuant to the principles determined in the State Wage Case 2002 decision. (f) By consent of all parties to an award, where the minimum rates adjustment has been completed, award rates may be expressed as hourly rates as well as weekly rates. In the absence of consent, a claim that award rates be so expressed may be determined by arbitration. (g) The State Wage Case adjustment will only be available where the rates in the award have not been increased, other than by safety net or State Wage Case adjustments, or as a result of the application of the Minimum Rates Adjustment principle, since 29 May 1991. 9 Award Review Classification Rate The Award Review Classification Rate of $448.40 shall be the rate below which no full-time adult employee (excluding trainees, apprentices and employees on a supported wage or on a probationary rate) should be paid under the relevant award. Where a classification in an award is below the Award Review Classification Rate the following process will apply on application: (a) The award will be listed for a mention at which the parties will report as to: (i) how the Award Review Classification Rate will be achieved, or (ii) whether the award is obsolete. The Commission may direct the parties to confer in order to set a program for an updating of the award to reflect the Award Review Classification Rate. (b) If the parties to the award do not appear at this mention, the Commission shall request the parties to the award to show cause why the award should not be considered obsolete, and rescinded under s17(3) of the Act. (c) Where no agreement is reached with respect to (a) above, the Commission shall relist the matter in order to conciliate the issues in dispute. (d) If the attempt at conciliation is unsuccessful the Commission shall arbitrate any outstanding issue. 10 Special Case Except for the flow on of test case provisions, any claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the principles, will be processed as a special case before a Full Bench of the Commission, unless otherwise allocated by the President. This principle does not apply to applications for awards consented to by the parties, which will be dealt with in the terms of the Act, or to enterprise arrangements, which will be dealt with in accordance with the Enterprise Arrangements principle. 11 Enterprise Arrangements (a) The Commission may approve of enterprise arrangements reached in accordance with this principle and the provisions of the Act. (b) Industrial unions of employees and industrial unions of employers, or industrial unions of employees and employers, or employees and employers may negotiate enterprise arrangements which, subject to the following provisions, shall prevail over the provision of any award or order of the Commission that deals with the same matters in so far as they purport to apply to parties bound by the arrangements, provided that where the arrangement is between employees and an employer a majority of employees affected by the arrangement genuinely agree. (c) An enterprise arrangement shall be an agreed arrangement for an enterprise, or discrete section of an enterprise, being a business, undertaking or project, involving parties set out in paragraph (b). (d) Enterprise arrangements shall be for a fixed term and there shall be no further adjustments of wages or other conditions of employment during this term other than where contained in the arrangement itself. Subject to the terms of the arrangement, however, such arrangement shall continue in force until varied or rescinded in accordance with the Act. (e) For the purposes of seeking the approval of the Commission, and in accordance with the provisions of the Act, a party shall file with the Industrial Registrar an application to the Commission to either: (i) vary an award in accordance with the Act; or (ii) make a new award in accordance with the Act. (f) On a hearing for the approval of an enterprise arrangement, the Commission will consider in addition to the industrial merits of the case under the State Wage Case principles: (i) ensuring the arrangement does not involve a reduction in ordinary time earnings and does not depart from Commission standards of hours of work, annual leave with pay or long service leave with pay; and (ii) whether the proposed award or variation is consistent with the continuing implementation at enterprise level of structural efficiency considerations. (g) The Commission is available to assist the parties to negotiations for an enterprise arrangement by means of conciliation and, in accordance with these principles and the Act, by means of arbitration. If any party to such negotiations seeks arbitration of a matter relating to an enterprise arrangement such arbitration shall be as a last resort. (h) Enterprise arrangements entered into directly between employees and employers shall be processed as follows, subject to the Commission being satisfied in a particular case that departure from these requirements is justified: (i) All employees will be provided with the current prescriptions (eg award, industrial agreement or enterprise agreement) that apply at the place of work. (ii) The arrangement shall be committed to writing and signed by the employer, or the employer's duly authorised representative, with whom agreement was reached. (iii) Before any arrangement is signed and processed in accordance with this principle, details of such arrangement shall be forwarded in writing to the union or unions with members in that enterprise affected by the changes and the employer association, if any, of which the employer is a member. (iv) A union or employer association may, within 14 days thereof, notify the employer in writing of any objection to the proposed arrangements, including the reasons for such objection and in such circumstances the parties are to confer in an effort to resolve the issue. (v) Where an arrangement is objected to by a union or employer association and the objection is not resolved, an employer may make application to the Commission to vary an award or create a new award to give effect to the arrangement. (vi) A union and/or employer association shall not unreasonably withhold consent to the arrangements agreed upon by the parties. (vii) If no party objects to the arrangement, then a consent application shall be made to the Commission to have the matter approved in accordance with paragraph (e) of this principle. (viii) Such arrangement once approved shall be displayed on a notice board at each enterprise affected. 11 Superannuation (a) An application to make or to vary a minimum rates or paid rates award which: (i) seeks a greater quantum of employer contributions than required by the Superannuation Guarantee (Administration) Act 1992 (Cth) ('the SGA Act'); or (ii) seeks employer contributions to be paid in respect of a category of employee in respect of which the SGA Act does not require contributions to be paid; shall be referred to a Full Bench for consideration as a special case, unless otherwise allocated by the President. Exceptions to this process are applications which fall within the Enterprise Arrangements and First Awards and Extensions to Existing Awards principles. (b) If an application is made that does not fall within paragraph (a), the Commission will, subject to paragraph (c): (i) make or vary an award by inserting a clause stating: 'Superannuation Legislation - The subject of superannuation is dealt with extensively by federal legislation including the Superannuation Guarantee (Administration) Act 1992 (Cth), the Superannuation Industry (Supervision) Act 1993 (Cth), the Superannuation (Resolution of Complaints) Act 1993 (Cth), and s124 of the Industrial Relations Act 1996. This legislation, as varied from time to time, governs the superannuation rights and obligations of the parties'. (ii) if appropriate, ensure that the award contains specification of an employee's earnings (eg 'ordinary time earnings') which, for the purposes of the SGA Act, will operate to provide a 'notional earnings base', and (iii) if the award is to continue to prescribe a 'flat dollar' amount of employer contribution, ensure that appropriate amounts are inserted so as to give effect to the levels of contribution required from time to time under the SGA Act. (c) The Commission may award provisions which differ from those in paragraph (b): (i) by consent; or (ii) in the absence of consent, by arbitration, provided the Commission is satisfied that there are particular factors warranting the awarding of different provisions. Such factors may include: (A) the wishes of the parties; (B) the nature of the particular industry or enterprise; (C) the history of the existing award provisions; (D) relevant decisions of the Commission establishing superannuation principles; and (E) relevant statutory provisions. (d) Before any different provisions are awarded under paragraph (c), either by consent or arbitration, the Commission must be satisfied, on expert evidence, that the award to be made will not contain requirements that would result in an employer not meeting the requirements imposed by the SGA Act. (e) Subject to s124 of the Act, any specification of a fund will carry with it the obligation for an employer to pay contributions at such intervals as are required by the fund. (f) In determining applications as to specification of fund, the Commission will, as appropriate: (i) ensure that any fund specified by it is one into which payment will meet the employer's obligations under the SGA Act; (ii) have regard to the Superannuation Industry (Supervision) Act 1993 (Cth) ('the Supervision Act') which provides for the prudent management of certain superannuation funds and for their supervision by the Insurance and Superannuation Commissioner. In particular, the requirement with respect to equal representation of employers and members on what are called 'standard employer-sponsored funds' (Pt 9 of the Supervision Act) should be noted; (iii) have regard to previous decisions of the Commission with respect to the specification of a fund or funds; and (iv) have regard to relevant statutory provisions. (g) Due to the variety of existing award superannuation provisions and the impact and complexity of the SGA Act, all applications to the Commission may not be capable of being dealt with in accordance with the approach set out above. In any such case it may be appropriate for the application to be dealt with as a special case. 13 First Award and Extension to an Existing Award Any first award or an extension to an existing award must be consistent with the Commission's obligations under Part 1 Chapter 2 of the Act. In determining the content of a first award the Commission will have particular regard to: (a) relevant wage rates in other awards, provided the rates have been adjusted for previous State Wage Case decisions and are consistent with the decision of the Stage Wage Case 1989 ; (b) the need for any alterations to wage relativities between awards to be based on skill, responsibility and the conditions under which the work is performed; (c) for conditions of employment, other than wage rates, prima facie the existing conditions of employment; (d) that the award would comply with the requirements of section 19 of the Act. 14 Equal Remuneration and Other Conditions (a) Claims may be made in accordance with the requirements of this principle for an alteration in wage rates or other conditions of employment on the basis that the work, skill and responsibility required, or the conditions under which the work is performed, have been undervalued on a gender basis. (b) The assessment of the work, skill and responsibility required under this principle is to be approached on a gender neutral basis and in the absence of assumptions based on gender. (c) Where the undervaluation is sought to be demonstrated by reference to any comparator awards or classifications, the assessment is not to have regard to factors incorporated in the rates of such other awards which do not reflect the value of work, such as labour market attraction or retention rates or productivity factors. (d) The application of any formula, which is inconsistent with proper consideration of the value of the work performed, is inappropriate to the implementation of this principle. (e) The assessment of wage rates and other conditions of employment under this principle is to have regard to the history of the award concerned. (f) Any change in wage relativities which may result from any adjustments under this principle, not only within the award in question but also against external classifications to which the award structure is related, must occur in such a way as to ensure there is no likelihood of wage leapfrogging arising out of changes in relative positions. (g) In applying this principle, the Commission will ensure that any alternative to wage relativities is based upon the work, skill and responsibility required, including the conditions under which the work is performed. (h) Where the requirements of this principle have been satisfied, an assessment shall be made as to how the undervaluation should be addressed in money terms or by other changes in conditions of employment, such as reclassification of the work, establishment of new career paths or changes in incremental scales. Such assessments will reflect the wages and conditions of employment previously fixed for the work and the nature and extent of the undervaluation established. (i) Any changes made to the award as the result of this assessment may be phased in and any increase in wages may be absorbed in individual employees' overaward payments. (j) Care should be taken to ensure that work, skill and responsibility which have been taken into account in any previous work value adjustments or structural efficiency exercises are not again considered under this principle, except to the extent of any undervaluation established. (k) Where undervaluation is established only in respect of some persons covered by a particular classification, the undervaluation may be addressed by the creation of a new classification and not by increasing the rates for the classification as a whole. (l) The expression 'the conditions under which the work is performed' has the same meaning as in Principle 6, Work Value Change. (m) The Commission will guard against contrived classification and over classification of jobs. It will also consider: i) the state of the economy of New South Wales and the likely effect of its decision on the economy; ii) the likely effect of its decision on the industry and/or the employers affected by the decision; and iii) the likely effect of its decision on employment. (n) Claims under this principle will be processed before a Full Bench of the Commission, unless otherwise allocated by the President. (o) Equal remuneration shall not be achieved by reducing any current wage rates or other conditions of employment. 15 Economic incapacity Any employer or group of employers bound by an award may apply to, temporarily or otherwise, reduce, postpone and/or phase in 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 vigorously tested. Significant unemployment or other serious consequences for the employees and employers concerned are significant factors to be taken into account in assessing the merit of any application. Such an application shall be processed according to the Special Case principle. Any decision to temporarily reduce or postpone an increase will be subject to a further review, the date of which will be determined by the Commission at the time it decides any application under this principle. 16 Duration These principles will operate until further order of the Commission. _________________________________________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.