Industrial Relations Commission of New South Wales CITATION: State Wage Case 2010 [2010] NSWIRComm 183 Unions NSW (Applicant) Minister for Industrial Relations (Respondent) PARTIES: Director of Public Employment (Respondent) Local Government Association of New South Wales and Shires Association of New South Wales (Respondent) Australian Federation of Employers and Industries (Respondent) FILE NUMBER(S): IRC 471 of 2010 CORAM: Boland J President; Walton J Vice-President; Harrison DP; Grayson DP; Tabbaa C CATCHWORDS: STATE WAGE CASE - Summons to show cause - Whether and to what extent the Commission should adopt the 'National decision' - Whether and to what extent the State Minimum Wage should be varied - Whether and to what extent changes should be made to minimum wages in State awards - Consideration of the future operation of minimum wage private sector State awards and the manner by which they are to be reviewed under s 19 of the Industrial Relations Act 1996 - Consideration of the method by which any variations to State awards are to be made - Consideration of the Wage Fixing Principles in respect of changes that are required to be made to them arising from recent legislative change - Consideration of proposals by Unions NSW to substantially amend the existing Wage Fixing Principles - General order made - Existing Wage Fixing Principles amended to reflect General order - Further proceedings listed in 2011 in respect of the review of awards under s 19 of the Industrial Relations Act - Draft proposed Principles announced for consideration by parties in proceedings listed for 2011 Australian Constitution s 51(37) Fair Work Act 2009 (Cth) s 27 Independent Contractors Act 2006 (Cth) s 7 s 35 LEGISLATION CITED: Independent Contractors Regulations 2007 (Cth) Industrial Relations Act 1996 s 5 s 8 s 17 s 19 s 20A s 48 s 50 s 51 s 52 s 215 s 216 Industrial Relations Advisory Council Act 2010 s 7 s 11 Industrial Relations Amendment (Non-operative Awards) Act 2010 Industrial Relations (Commonwealth Powers) Act 2009 Annual Wage Review 2009-10: [2010] FWAFB 4000; (2010) 193 IR 380 Health Employees Pharmacists (State) Award, Re [2003] NSWIRComm 453; (2003) 132 IR 244 National Wage Case - September 1983 (1983) 4 IR 429 CASES CITED: Public Hospital Nurses (State) Award (No 3), Re [2002] NSWIRComm 325; (2002) 121 IR 28 State Wage Case 1983 (1983) 5 IR 1 State Wage Case 2006 (No 6) [2006] NSWIRComm 204; (2006) 153 IR 268 State Wage Case 2008, Re [2008] NSWIRComm 122; (2008) 180 IR 370 State Wage Case 2009, Re [2009] NSWIRComm 120; (2009) 186 IR 277 HEARING DATES: 1 and 2 December 2010 DATE OF JUDGMENT: 16 December 2010 Mr A A Hatcher SC (Applicant) Unions NSW Mr I Taylor of counsel (Respondent) on behalf of Minister for Industrial Relations Crown Solicitor LEGAL REPRESENTATIVES: Mr J V Murphy of counsel (Respondent) Director of Public Employment Crown Solicitor Mr A T Britt of counsel (Respondent) Local Government Association of New South Wales and Shires Association of New South Wales Mr D Makins, Industrial Officer (Respondent) Australian Federation of Employers and Industries JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: BOLAND J, President WALTON J, Vice-President HARRISON DP GRAYSON DP TABBAA C Thursday 16 December 2010 Matter No IRC 471 of 2010 STATE WAGE CASE 2010 Summons to Show Cause - Commission on its own Initiative pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996 DECISION OF THE COMMISSION [2010] NSWIRComm 183 INTRODUCTION 1 The New South Wales Government decided in late 2009 to refer to the Commonwealth sufficient power to legislate a national industrial relations system for the private sector, based on s 51(37) of the Australian Constitution. 2 That decision was given effect by the Industrial Relations (Commonwealth Powers) Act 2009, which was assented to on 14 December 2009. The referral took effect on 1 January 2010 creating, for the first time, a national industrial relations system for the private sector. 3 The principal effect of referral was to remove most private sector employers and employees from the New South Wales industrial relations jurisdiction and make them subject to the provisions of the Fair Work Act 2009 (Cth). 4 As a result of the terms of the referral, the following classes of employees remain in the New South Wales industrial relations jurisdiction: · public sector employees and their employers, · local government sector employees and their employers, and · until September 2011, deemed employees, so classed as a result of the operation of s 5(3) and Schedule 1 of the Industrial Relations Act 1996 ('the IR Act'), who have been working for the same 'employer' since March 2006 (see s 7(1)(a) of the Independent Contractors Act 2006 (Cth) and s 35(4) of that Act as modified by Schedule 1 to the Independent Contractors Regulations 2007 (Cth)). 5 Other features of the New South Wales industrial relations system such as, for example, regulation of public vehicles and carriers by means of Chapter 6 of the IR Act, are unaffected by the referral and remain within the New South Wales jurisdiction. 6 New South Wales retains the power to legislate in relation to matters specifically not excluded by the Fair Work Act (Cth). Such matters include superannuation, occupational health and safety, matters relating to outworkers and child labour (see s 27 of the Fair Work Act (Cth)). 7 These legislative changes, removing as they did the private sector from the Commission's jurisdiction under the IR Act, necessitate a consideration of their implications for wage fixing in New South Wales. 8 Additionally, however, in Re State Wage Case 2009 [2009] NSWIRComm 120; (2009) 186 IR 277 the Full Bench stated: [157] The general consensus of the parties seemed to be that the Principles should be retained, mainly because they provide certainty and ensure consistency. It may be, however, that some or all of the Principles are unnecessary and anachronistic. We consider the question of whether the Principles have any future or should be replaced by more contemporary rules, needs to be further explored. [158] Accordingly, the President will convene a conference of the parties at 10.00 am on Tuesday 2 March 2010 to consider the question of whether the Principles have outlived their usefulness. Two weeks prior to the conference (16 February 2010) the parties will file and serve papers outlining their respective positions regarding the Principles. 9 These conferences were adjourned pending the decision on 3 June 2010 of Fair Work Australia ('FWA') Minimum Wage Panel in its inaugural Annual Wage Review 2009-10: [2010] FWAFB 4000; (2010) 193 IR 380. Its decision was to increase all modern award minimum wages by $26.00 per week (see [338]). That resulted in the National Minimum Wage being set at $569.90 per week (at [339]). 10 Pursuant to the provisions of Part 3 of the IR Act, on 18 June 2010, the Commission issued a Summons to Show Cause why it should not act on the FWA Annual Wage Review decision. This matter was joined with other issues being discussed at the conference convened by the President. Because of the significance of the issues, the discussions continued over a number of months thereby contributing to a delay to any State Wage Case hearing which has historically taken place mid-year. 11 Arising out of those conferences, the Minister for Industrial Relations helpfully identified five issues that required determination in the context of a State Wage Case hearing. The issues were identified as follows: (1) whether and to what extent the State Minimum Wage should be varied; (2) whether and to what extent changes should be made to minimum wages in State awards; (3) the future operation of minimum wage private sector State awards and the manner by which they are to be reviewed under s 19 of the IR Act; (4) the method by which any variations to State awards are to be made; and (5) the Wage Fixing Principles in respect of changes that are required to be made to them arising from the recent legislative changes. 12 No party demurred that these were the matters that required determination. In relation to the fifth matter, the legislative changes referred to are the introduction of the concept of non-operative awards into the IR Act (see ss 17, 19, 20A and 52) by the Industrial Relations Amendment (Non-operative Awards) Act 2010 and the passing of the Industrial Relations Advisory Council Act 2010, which provides for the establishment of an Industrial Relations Advisory Council the functions of which are (in s 7): (a) to assist the Minister in formulating, and to advise the Minister on implementing, policies affecting industrial relations and employment in the State, (b) to advise the Minister on legislative proposals of industrial significance, (c) to consider matters referred to the Council by the Minister or members of the Council. 13 Section 11 of the Industrial Relations Advisory Council Act also provides: 11 Review of Act (1) The Minister is to review this Act to determine whether the policy objectives of the Act remain valid and whether the terms of the Act remain appropriate for securing those objectives. (2) The review is to be undertaken as soon as possible after the period of 5 years from the date of assent to this Act. (3) A report on the outcome of the review is to be tabled in each House of Parliament within 12 months after the end of the period of 5 years. 14 Importantly, in addition to the five issues identified above, Unions NSW proposed substantial changes to the Wage Fixing Principles (which the Minister referred to as the 'sixth issue'). This was a matter of significant disagreement with other parties in the proceedings who generally took the view that there should be no amendments to the Principles other than changes arising from recent legislative changes and amendments needed to accommodate the Commission's decision in this case in respect of any increases to minimum rates of pay and allowances. SUBMISSIONS 15 Written and oral submissions were received from the following parties: (1) Unions NSW, the State peak council for employees: see s 215 of the IR Act, (2) The Director of Public Employment ('the DPE'), (3) The Minister for Industrial Relations ('the Minister'), (4) The Local Government and Shires Association ('the LGSA'), (5) The Australian Federation of Employers and Industry ('the AFEI'), a State peak council for employers: see s 216 of the IR Act, The Australian Hotels Association ('the AHA') made written submissions but did not seek to appear in the proceedings. EVIDENCE 16 Unions NSW relied on statements of Mark Lennon, Secretary of Unions NSW, and Peter Remfrey, Secretary of the Police Association of NSW. Those statements were in the context of that organisation's proposal for a new set of Wage Fixing Principles to overcome problems the union movement had encountered with the NSW Government's Wages Policy. That Policy limited the increases in wages in the public sector to 2.5 per cent per annum unless increases above that amount were fully funded by direct cost offsets in the nature of 'employee related cost savings'. The statements of the two officials were highly critical of the Policy and the manner in which it was applied. Mr Lennon expressed the opposition of Unions NSW to the Policy as follows: The concerns which have been experienced and expressed by Unions NSW affiliates concerning the operation of the Wages Policy include the following: (a) The basic 2.5% increase does not necessarily cover rises to the cost of living experienced by public sector employees, and is not negotiable. (b) Employees have been required in many cases to sacrifice current conditions of employment to pay for an increase above 2.5%. (c) The Wages Policy operates on a "one size fits all" basis, regardless of whether in a particular department, agency or occupation there can be identified the type of costs savings necessary to generate a wage increase. (d) The process of negotiating and identifying costs savings has been time consuming and resource-intensive for many affiliates, and has in some cases required extensive assistance from the Commission. This has caused significant delay and has aggravated industrial relations in many areas of the public sector. (e) The Wages Policy provides no mechanism for the recognition of work value and productivity changes where these are not linked to direct cost offsets. This puts affiliate unions in the position where they must elect between negotiating under the framework of the Wages Policy, and thus abandon any claims connected with work value and/or productivity, or run a major case before the Commission. (f) The requirement that all offers put to unions be endorsed by the Budget Committee of Cabinet and all final agreements be endorsed by that Committee has led to delays in communication, negotiations and the settlement of areas of dispute, and has politicised the process. In some cases, the centralisation of the process has meant that unions have faced long delays in obtaining even a response to wages claims made when agreements have expired. It has also led, in conjunction with the general constraints of the Wages Policy, to frequent situations where the persons sent by various government department and agencies to negotiate with relevant unions representatives have turned out to have no real authority to negotiate anything. 17 Mr Lennon gave examples of the difficulties his affiliates had faced in negotiations involving the application of the Wages Policy and these included: Fire Brigade Employees Union, Police Association, Public Service Association, NSW Nurses Association and the Australian Workers' Union. 18 Mr Lennon's statement had annexed to it an 'Economic Report for State Wage Case 2010' that Unions NSW had commissioned from BIS Shrapnel Pty Limited. We shall refer to this later in the decision. Mr Lennon was not required for cross-examination either on his statement in chief or his reply statement. 19 Mr Remfrey made a reply to an affidavit of Glenn Bacic, Director, Industrial Relations of Public Sector Workforce, Public Sector Management Reform Division, Department of Premier and Cabinet. In his statement Mr Remfrey detailed the course of negotiations for a new Crown Employees (Police Officers) Award to replace the 2008 award. Mr Remfrey alleged that the government and Police representatives engaged in delay and 'backsliding' and failed to engage in good faith bargaining. Mr Remfrey said their conduct was 'disingenuous and provoked industrial action' because of their obsession with cost cutting consistent with the Wages Policy, which dominated the negotiations. Mr Remfrey was not required for cross-examination. 20 We have mentioned the affidavit of Mr Bacic. His evidence was in support of the DPE's position. Mr Bacic explained the main features of the Government's Wages Policy and sought to respond to the criticisms in Mr Lennon's statement. Mr Bacic was required for cross-examination. 21 The affidavit of Peter Horn, Senior Director, Fiscal Strategy with the NSW Treasury, was tendered by the DPE. Mr Horn gave evidence regarding wage movements in the public sector. Included in that evidence was the following: Wage Price Index data collected by the Australian Bureau of Statistics records wages movements in the NSW public sector going back to September 1997. According to this data, between September 1997 and June 2010 NSW State and Local Government employees have experienced wage increases averaging 4.2 per cent per annum. Over the same period Sydney inflation (excluding the introduction of the GST) has averaged 2.6 per cent per annum; therefore resulting in real wage increases averaging 1.5 per cent per annum or 21 per cent in total. Between September 1997 and June 2010, in real terms, average wage increases in the NSW public sector have exceeded those in: · the NSW private sector by a cumulative 10.4 per cent · the public sector in the rest of Australia by 5.8 per cent and · Federally registered wages agreements by 4.9 per cent (up to March 2010). ... real wages in the NSW Public Sector kept pace with other groups until around 2003 when large wage increases (4 per cent in January 2003 and 5 per cent in July 2003) flowing from the March 2000 Memorandum of Understanding on award conditions with Public Sector Unions , applied. Further, work value claims through the period 2003 to 2005 resulted in cumulative special case increases to nurses of 9.5 per cent and to Teachers of 12 per cent. 22 Mr Horn also gave evidence regarding the Wages Policy. In that respect, he stated: The NSW Government Wages Policy 2007 is an operational directive to NSW Government Agencies and State Owned Corporations providing a framework and procedure for the conduct of wage negotiations with unions. Much of the policy concerns the process agencies must follow in terms of developing and gaining approval for wage bargaining parameters. The policy was established following a period of substantial wage increases to public sector employees. It was designed to maintain these wage increases in real terms and provide scope for future real wage increases where they can be funded by identified employee related cost savings. In summary the Wages Policy provides for: (i) minimum wage increases of 2.5 per cent per annum; (ii) scope for wage increases above 2.5 per cent per annum provided they can be funded by employee related cost savings; (iii) Cabinet approval of bargaining parameters; (iv) a cooperative, honest and problem solving approach from agencies; (v) no payment of backpay unless Cabinet approval is obtained; and (vi) comprehensive industrial instruments reflecting the outcomes negotiated between the parties. The Wages Policy applies to Government Agencies and State Owned Corporations. It does not purport to bind the unions, or union members – the public sector unions remain free to respond to Government proposals as they see appropriate, including seeking the assistance of the Commission. In 2007 the Wages Policy was extended to cover State Owned Corporations as wage increases in the Public Trading Enterprise sector that exceed inflation plus productivity will result in either: lower dividends, which are used to fund government services such as health and education, or the imposition of higher user charges, which are ultimately borne by NSW households. The Wages Policy therefore applies a consistent bargaining framework to both the General Government Sector and the Public Trading Enterprise Sector agencies. The Wages Policy is set within the framework of the Westminster System of Government where key expenditure decisions are made collectively by the Cabinet. The Wages Policy provides for considerable authority to be delegated to agencies for the purpose of negotiating agreements, within parameters determined by Cabinet. 23 Mr Horn also dealt with the rationale underpinning the amount of 2.5 per cent in the Wages Policy. In that respect he stated: A key objective of the Government wages policy is to maintain real wages, over time. In determining real wage maintenance in new public sector wage agreements, the alternative to the use of a long-run inflation parameter is the use of forecasts. There are several issues to deal with in utilising inflation forecasts. … The approach adopted by the NSW Government … is to rely on the RBA to achieve its agreement with the Commonwealth Government to maintain national CPI inflation within a range of 2-3 per cent over the cycle. That is, on average, the CPI will increase by 2.5 per cent per annum. While increases in the CPI may exceed, or be less than 2.5 per cent in the short-term, the RBA actively pursues monetary policy to achieve the target range. Inflation forecasts are not certain, but what is certain is that the RBA will maintain its inflation target at 2-3 per cent. If the RBA achieves its target range over time, an indexation factor of 2.5 per cent will also achieve the NSW Government's goal of maintaining the past significant real wage increases of NSW public sector employees. Inflation will fluctuate around 2.5 per cent in the short-term but over time it is expected to average 2.5 per cent. The current inflation targeting regime was formalised in August 1996 in a 'Statement on the Conduct of Monetary Policy' jointly agreed by the Treasurer and the Governor of the Reserve Bank (renewed again in 2010). Under this framework the Reserve Bank was given operational independence in achieving this goal. Since that time the average annual increase in (ex-GST) Sydney CPI has been 2.5 per cent per annum. Mr Horn was required for cross-examination. 24 The LGSA relied on an extensive affidavit of Lillian Tiddy, Director of the Workplace Solutions Division of the LGSA. Ms Tiddy's evidence addressed the following matters: (a) The status of the local government sector. It encompasses 152 general purpose councils and 13 special purpose councils across metropolitan, rural and regional NSW; is a $7.8 billion industry and employs about 44,000 full-time equivalent employees. The sector services include: community services; public health services; cultural, educational and information services; sporting, recreational and entertainment services; environment conservation, protection and improvement; waste removal, treatment and disposal; pest eradication and control; energy production, supply and conservation; water, sewerage and drainage; fire prevention, protection and mitigation; land and property development; housing; industry development and assistance; and tourism development and assistance. (b) The awards that cover the sector, are the Local Government (Electricians) (State) Award and the Local Government (State) Award 2010. Ms Tiddy observed that the sector has a history of making consent awards with Local Government unions since 1992. (c) The Council Salary Systems. In that respect Ms Tiddy deposed, inter alia: The Local Government (State) Award 2010 is a minimum rates award because of clauses six (6) and seven (7). This has been the case in NSW Local Government since 1992. The Associations conducted an online survey across its membership base of 152 general purpose councils and 13 special purpose councils from 15 October 2010 to 2 November 2010 and in that respect: 47.62% of respondents had salary system entry level rates of pay which were, on average, a margin of 5.53% above the entry level rates of pay under the Local Government (State) Award ; 37.14% of respondents had an average salary range of 13.96%; and 13.33% of respondents had a salary system established under enterprise arrangements. The responses to the Associations' survey confirms that NSW Local Government employees receive higher rates of pay, on average, than what they would otherwise receive if they were reliant on State Wage Case adjustments only and that NSW Local Government utilises the Commission's Enterprise Arrangements Principle to prescribe rates of pay in excess of the Local Government (State) Award. The industry parties, with the assistance of the Commission, have been able to negotiate for a new award, and for award variations, in an effective, cooperative and orderly way, and in accordance with the relevant objects in section 3 of the Act. The negotiations for the 2010 Award are an example of such negotiations. 25 Ms Tiddy also addressed Unions NSW's proposed Wage Fixing Principles, taking objection, in particular, to proposed Principle 10 - Negotiating Principles and Principle 3 - Economic Adjustment. Ms Tiddy identified a list of enterprise awards and private sector awards that continue to apply in the local government sector. Ms Tiddy was not required for cross-examination. ADOPTION OF NATIONAL DECISIONS 26 Sections 48 and 50 of the IR Act provide: 48 What is a National decision? A National decision is a decision of the Minimum Wage Panel or a Full Bench of Fair Work Australia that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to the jurisdiction of that panel or body. ... 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. 27 Since 2006 there has been such a disconnect between the federal system of fixing minimum wages and that applicable in New South Wales that the Commission has declined to follow the National decision. With the introduction of the Fair Work Act (Cth) those differences have now narrowed. Nevertheless, the differences remain significant and as it will be seen, whilst there is scope to adopt some provisions of the National decision, there is no scope to adopt federal wage fixing principles because, on the material presented in these proceedings, there are no such principles. 28 Again, as it will be seen, we do not consider it to be an option to abandon the concept of wage fixing principles in order to follow the federal example. Whilst federally such principles may have no utility because of the federal approach to wage fixing and the absence of access to arbitration in the ordinary course, that is not the case under New South Wales law. 29 The result is that we will adopt those provisions of the National decision where we are satisfied that it is consistent with s 50, but we intend to retain the concept of wage fixing principles, albeit amended principles that conform to the changed circumstances we have identified in this decision. CONSIDERATION State minimum wage 30 There was general support for the proposition that the New South Wales State Minimum Wage should be increased to $569.90, being the same as the National Minimum Wage set by Fair Work Australia. This was the first such increase in the federal jurisdiction since October 2008. In contrast, the New South Wales State Minimum Wage was last increased on 30 July 2009 when the Commission set the State Minimum Wage at $568.20. 31 Consistent with s 50 of the IR Act, there is no good reason not to adopt the outcome of the Minimum Wage Panel's decision of 3 June 2010, namely a Minimum Wage of $569.90. To do so would be consistent with the policy underlying ss 48 and 50 of the IR Act for the National and State Minimum wages to be aligned. This means that the State Minimum Wage should be increased by $1.70 to $569.90. 32 The State Minimum Wage is currently referable to the Award Review Classification Rate ('ARCR'): see Principle 9 of the Wage Fixing Principles. The ARCR is 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. To date, that rate has been set by reference to the C14 minimum rate of pay under the Metal, Engineering and Associated Industries (State) Award, which is a rate that has been considered an appropriate minimum rate of pay for award covered employees in New South Wales. 33 The approach that Unions NSW has taken to the changes it regards as necessary to the Wage Fixing Principles meant that it was unnecessary for that body to address the ARCR. This is perhaps because Unions NSW proposed an 'Economic Adjustment' principle whereby, on an annual basis or otherwise as may be appropriate, a State decision would set a standard economic adjustment to rates of pay in all State awards. We shall deal with this issue in more detail later in the discussion on replacement principles. 34 The Minister submitted that there was no good reason to change the manner by which the ARCR in Principle 9 is set. That is, it should continue to reflect the C14 minimum rate of pay under the Metal, Engineering and Associated Industries (State) Award. 35 The DPE supported the Minister's approach. The LGSA did not squarely address the issue, however, its proposed principles appear to follow the Minister's approach. Neither, AFEI nor the AHA addressed the issue. 36 We have decided to adopt the Minister's approach. The ARCR will be increased to reflect the C14 minimum rate of pay under the Metal, Engineering and Associated Industries (State) Award. Whether minimum wages in State awards should be adjusted 37 The Minister's position was that the minimum rates of pay in all State awards should be varied following the Minimum Wage Panel Review decision. 38 It was submitted that, despite the transfer of the private sector to the federal jurisdiction, current State common rule industry and occupational awards continue to play an important role notwithstanding their reduced application. Reference was made to the recent amendments to the IR Act. In that respect s 20A provides: 20A Non-operative awards (1) The Commission may: (a) if the Commission is satisfied that an award does not have any current application to any employer or employee—make a declaration to that effect, or (b) if the Commission is satisfied that a non-operative award has current application to an employer or employee—declare that the award is no longer a non-operative award. (2) Section 11 applies to any such declaration as if it were an award. (3) The Industrial Registrar is to keep a register of non-operative awards. (4) A copy of the register is to be published by the Industrial Registrar on the NSW industrial relations website. 39 Section 17 of the IR Act was amended to prohibit variation or rescission of non-operative awards. However, there is an exception to this prohibition, and that is to permit the variation of non-operative awards to give effect to any flow-on of National decisions such as national minimum wage reviews, or to give effect to State decisions made by the Commission pursuant to s 52. Section 52(2) of the IR Act now provides: (2) When adopting the principles or provisions of a National decision or making a State decision, the Commission is to vary non-operative awards to the extent necessary to give effect to the decision. 40 In the Minister's second reading speech (23 November 2010) it was stated: It is also expected that non-operative awards will be varied to reflect national decisions made from time to time by Fair Work Australia. In appropriate circumstances, the New South Wales Commission will apply these decisions to non-operative awards in the New South Wales system. Preventing the rescission of these awards is necessary for two reasons: firstly, these awards play a benchmark role in the New South Wales industrial relations system and are the repository of many years of arbitral history; and, secondly, the ongoing role of New South Wales awards needs to be considered, along with many other issues in consultation with the industrial parties, in a wide-ranging review of the New South Wales Industrial Relations Act. 41 The Minister's submissions found favour with the other parties, with the exception of the AFEI: (a) the DPE supported the Minister; (b) Unions NSW agreed that there was utility in adjusting wage rates and State common rule awards for the reasons identified by the Minister; (c) the LGSA supported general increases to be made by way of a general order; (d) the AHA did not make a submission on this question; (e) the AFEI opposed the Minister's approach, contending that to make a general increase would create uncertainty for employers and rejected the suggestion that State awards serve as a benchmark and as such should be maintained. The AFEI submitted that there was currently some relative alignment between State and federal modern awards and that an increase to State awards would cause them to be 'misaligned' with these instruments. 42 AFEI submitted: [C]urrently state awards and 'counter-part' instruments in the federal Fair Work system are currently relatively aligned. Any upward adjustment of minimum wages in state awards now would destroy this 'equality', which was achieved following the Fair Work Australia AWR decision in June 2010. … AFEI submits that if the Commission is minded to award an increase to state awards, any increase will cause minimum wage rates in common rule occupational and industry state awards to be again misaligned with federal instruments applying to other employees performing identical work. 43 There is no proper basis to refrain from adjusting rates of pay under State awards. We agree with the submissions of the Minister that State award rates are not currently aligned with those contained within modern awards and there is no capacity to simply 'align' the rates without a complete review and change to existing State awards given their different coverage and industrial history. We can see no obvious benefit to be derived from aligning State and federal awards in the manner proposed. Whether any adjustment to award rates should be a percentage or flat dollar increase 44 The Minister submitted that the increase to State awards should be a percentage increase rather than a flat dollar increase. The Minister's reasons included the effect of flat dollar increases on relativities and the importance of maintaining the relevance of State awards, which would be enhanced by percentage increases. 45 The AFEI opposed any increase, but did not put any submissions as to whether, if there was an increase, it would be better to be a percentage increase rather than a flat dollar increase. 46 As to the other parties: (a) Unions NSW agreed that the increase should be a percentage increase; (b) The LGSA agreed that it was preferable to have a percentage increase rather than a flat dollar increase; (c) The AHA did not put any submission on this subject; (d) The DPE supported the Minister's submission. 47 In Re State Wage Case 2008 [2008] NSWIRComm 122; (2008) 180 IR 370 at [285]-[298] the Commission expressed concern about the effects of flat dollar increases on relativities within and between awards and as a result determined to award general increases in percentage form. This approach was continued in the State Wage Case 2009. We propose to continue to adjust minimum rates of pay by a percentage increase. To what extent should minimum wages in State awards be adjusted? 48 The Minister, supported by the DPE and the LGSA, proposed an increase of 3.5 per cent calculated by reference to an annual increase of 2.5 per cent to all minimum award rates from December 2010 (taking into account that by December 2010 it will be about 17 months since the last increase). 49 The Minister contended that an annual increase of 2.5 per cent was 'in line with the mid-point of the Reserve Bank's targeting range and is consistent with long-run inflation'. Reliance was placed on the evidence of Mr Horn, which we referred to earlier. 50 Unions NSW disagreed with the Minister's position regarding the quantum of increase. It was submitted in relation to the Minister's position: It does not appear to be a coincidence that the quantum of the increase and its rationale are the same as for the Wages Policy. It appears that the Minister is, indirectly, seeking Commission endorsement for the fundamental feature of the Wages Policy without any real regard to the current rate of inflation and changes to the cost of living. 51 Unions NSW submitted that the increase in award rates of pay should be 4.25 per cent. This was based on an annual adjustment of 3.0 per cent and again having regard to the 17 months gap since the last increase. 52 Unions NSW relied on a report it commissioned by BIS Shrapnel which showed that the Reserve Bank's forecast inflation rate for the 12 months from the time of the hearing of this matter (Consumer Price Index to December 2011) is 3.1 per cent, with BIS Shrapnel projecting a slightly lower 2.9 per cent in the same period and an average of 3.0 per cent for the two-year period to the end of financial year 2011-2012. This led BIS Shrapnel to conclude as follows: This means that a 2.5 per cent base increase in wages will not maintain real wages – it would lead to an erosion of real wages for NSW public sector employees of 0.5per cent per annum – and is therefore inconsistent with [the NSW Government's] own wages policy. (emphasis in original) 53 Senior counsel for Unions NSW submitted that: · The Minister's own economic material was at variance with its position that an increase of 2.5 per cent would maintain real wages. · The NSW Treasury's forecast for inflation as at the time of the NSW Budget was that inflation (as measured by the Sydney CPI) would be 2.75 per cent in the 2010-2011 and 2011-2012 financial years (with the Wage Price Index being 3.0 per cent over the same period). Thus the Minister was also effectively forecasting a reduction in real wages to any employees to whom its 2.5 per cent figure would apply. 54 The idea that wages should be adjusted in line with the arbitrarily fixed mid-point of the Reserve Bank's targeting range for inflation over the longer term, regardless of how much the rate of inflation might fluctuate from year to year, is a novel one, and one that we do not propose to adopt. 55 A proper case has been made out by Unions NSW for adjusting minimum wages on the basis of an annual increase of 3.0 per cent. The cost impact would be negligible given that it would not apply to awards in the public sector and would be subject to absorption in respect of the local government awards. According to the DPE it was estimated that only about 2,200 public sector workers, including some 1,500 employed under the State Training Wage Award, still rely on increases which occur based on State Wage Case decisions. 56 Accordingly, we propose to increase minimum award rates by 4.25 per cent from the date of this Decision. Method by which any variations to State award rates of pay are to be made 57 The Minister submitted that any increase in State award rates of pay would best occur by the Commission exercising its power to make a General Order pursuant to s 52 of the IR Act. It was submitted that this approach was appropriate having regard to the limited application of New South Wales awards and the resources that would have to be expended by parties to adjust rates if they were to be adjusted on an award by award basis upon application. Unions NSW, the LGSA and the DPE supported the Minister's approach. 58 The only party to oppose this approach, consistent with its generally negative attitude to the issues required to be addressed, was the AFEI, which opposed any increase operating by way of a general order. The AFEI submitted that any increase in award rates should be undertaken by individual award applications by parties who hold an interest in the award. We agree with the Minister's position that: The AFEI submission is consistent with its view (contrary to the view of the Minister and other parties) that there is no need to maintain the relevance of common rule State awards, and its rejection of the submission that those awards continue to play an important role including as a benchmark for other State awards. In the Minister's submission, if the Commission accepts the submission that it is appropriate to maintain State awards at this stage then it follows that it would be appropriate to do so by way of a General Order. Certainly, no good reason is proffered as to why it is appropriate to require the parties to make individual applications in respect of each award. The only effect of that approach would be to make it less likely that awards be increased and delay increases in respect of many awards. It is not clear why either of those two outcomes would be seen to be preferable. 59 In the State Wage Case 2008, the Commission used its power under s 52 to set the State Minimum Wage. In that decision, the Commission said: [316] By s 52 the Commission has the power to make orders that would give effect to the State decision by the establishment of rates of pay or conditions of employment. As a matter of construction the expression "other orders" is not co-extensive with the expression "award". In our view, the reference to "orders" recognises that the Commission may alter the terms of employment of those in its jurisdiction other than by the making or varying of an award. This would ordinarily arise where the Commission has been minded to make a general order varying all awards, but nothing in the language of the section indicates that the Commission's powers are to be confined to an order of that character. 60 As that passage makes clear, the Commission has power to make a General Order varying all relevant New South Wales State award minimum rates of pay to give effect to any general wage increase it determines. We propose to make a General Order in relation to these proceedings. Section 19 review process 61 Section 19 of the IR Act provides that the Commission is required to review each award at least once in every 3 years. The purpose of a review under s 19 is to modernise awards, to consolidate awards relating to the same industry and to rescind obsolete awards. 62 The Minister submitted that the s 19 review process should commence by categorising awards into four categories before beginning the process of reviewing particular awards. The Minister submitted that the categories would be as follows: 1. Awards that apply to public and local government employees, namely: a. public sector awards; b. local government sector awards; and c. private sector common rule and occupational awards which also apply to employees in the public and local government sectors; 2. common rule and occupational awards that apply to deemed employees pursuant to Schedule 1 of the IR Act. These include milk vendors, cleaners, carpenters, joiners, bricklayers, painters and bread vendors; 3. enterprise awards that apply to a specific enterprise and which have no ongoing application; 4. 'non-operative awards', being awards which appear to have no current application to any employer or employee as a result of the referral of industrial relations powers to the Commonwealth. The Minister helpfully provided lists of awards in each category. 63 As the Minister observed, the review question is now affected by the Industrial Relations Amendment (Non-operative Awards) Act. The Minister submitted that in light of the passing of this Act the appropriate approach to take to s 19 reviews was: a. To first consider whether the awards which fall into the Minister's categories 3 and 4, noted above, are 'non-operative awards' within the meaning of the IR Act as amended; and b. To thereafter proceed to review the other awards in the usual manner. 64 The Commission will commence the s 19 review process early in 2011 and in doing so will further consider the appropriate procedure in light of current practices and following discussions with the stakeholders. In February 2011, Walton J, Vice-President will convene a conference of the parties for the purpose of giving directions as to the process and the timetable for the review. WAGE FIXING PRINCIPLES Current Principles 65 We propose to amend the current wage fixing principles to reflect our decision in relation to the question of State Wage Case adjustments, allowances, the ARCR and the minimum wage. The amendments are minimal because, as it will be seen, we intend to replace the existing Principles before 1 March 2011. 66 The State Wage Case Adjustment Principle will be amended to provide for a 4.25 per cent increase as will the Allowances Principle. The ARCR Principle will be amended to provide for a rate of $592.30 per week. Principle 9A - Minimum Wage will be amended to provide for a minimum wage of $569.90. The Principles are set out in Appendix A. Principles proposed by Unions NSW 67 The most contentious issue in the proceedings was the question of whether, and to what extent, the Commission's Wage Fixing Principles should be amended as proposed by Unions NSW. Its proposed Principles have the following principal features: (a) A new Economic Adjustment Principle, which is intended to replace the existing Principle 8, State Wage Case Adjustments. The new principle is intended to have practical application to all employees in the Commission's industrial jurisdiction, and provide a mechanism by which the real value of employees' wages/salaries may be protected against inflation and changes to the cost of living. ... (b) A new Arbitrated Case Principle, which will govern contested applications for increases above the basic economic adjustment. It replaces the existing Special Case and Work Value Principles, and would permit the consideration of claims having regard to a wide range of factors, most notably work value, productivity and efficiency. It also permits attraction and retention issues to be considered, in a context where the majority of employees within the NSW industrial jurisdiction are now covered by paid rates awards and thus where overaward payments are not available to resolve labour market issues which arise. (c) A modified Minimum Wage Principle, which explicitly links the State Minimum Wage to the National Minimum Wage. (d) A new set of Negotiating Principles, designed to apply in the specific public and local government context. These principles are based on the premise that negotiations leading to consent awards will be a major feature of the NSW industrial jurisdiction in the future, as it has been in recent years, and are intended to ensure that the type of negotiating difficulties which have occurred under the Wages Policy (as identified in the statement of evidence of Mark Lennon, Secretary of Unions NSW) do not continue into the future. In particular, the principles have the following requirements: (i) The early facilitation of discussions between unions and employees to ensure that negotiations proceed on an informed basis. (ii) A requirement that negotiations commence at least three months before the expiry of an existing award, with a corresponding requirement to negotiate in response to claims made within 14 days. This is intended to ensure that negotiations are not unduly delayed by the conduct of any party. (iii) A requirement that unions delegates be involved in negotiations, to ensure proper employee representation, and that parties are represented by persons with proper negotiating authority. The latter aspect will avoid the situation described in Mr Lennon's statement whereby NSW Government departments and agencies have frequently been represented in negotiations (including in Commission conciliation proceedings) by persons who have no capacity to make decisions and who merely repeat instructions emanating from higher up in the NSW Government. (iv) Parties are required to respond to each other in a timely way, again to ensure that negotiations are not delayed or frustrated by the failure of any party to attend diligently to the task of reaching a negotiated outcome. (v) A right of either party to seek the assistance of the Commission by way of the exercise of conciliation and arbitration powers, in order to facilitate an early and satisfactory conclusion to the process. Recent experience has demonstrated that the early involvement of the Commission in public sector wages/salaries negotiations, including through the "Bluescope" process, has tended to lead to both a better process and a better outcome. 68 No other party supported Unions NSW in its bid for a radical change to the Wage Fixing Principles. There was, however, support by other parties (that is, other than Unions NSW) for the Minister's proposals regarding modest amendments. These changes included amendments to facilitate how minimum wages in awards are varied in future State Wage Cases and the extension of the application of the NSW Minimum Wage to junior employees, employees to whom training arrangements apply and employees with a disability. The main changes proposed by the Minister affect Principle 8 - State Wage Case Adjustments and Principle 9A - Minimum Wage, which presently concerns the minimum wages for adult employees, who are employed in the jurisdiction of the Commission and whose employment is not subject to the terms of an industrial instrument. 69 The current Wage Fixing Principles have their origin in the State Wage Case 1983 (1983) 5 IR 1, which adopted in whole the principles taken up by the Australian Conciliation and Arbitration Commission in the National Wage Case - September 1983 (1983) 4 IR 429. As Unions NSW submitted, those principles were formulated in the context of the economic and industrial circumstances then prevailing, including the existence of a centralised wage fixing system, a recent wages 'breakout' followed by a wages freeze, a 'deep and prolonged international recession', relatively high rates of inflation, and the implementation by the incoming Commonwealth Government of a wages 'Accord' intended to deliver wage restraint in return for improvements to the 'social wage'. 70 The adoption of those principles in the New South Wales jurisdiction was predicated upon the existence of a major private sector industrial jurisdiction in NSW, variously estimated as covering 50-65 per cent of all employees in New South Wales. These employees were for the most part covered by minimum rates common rule awards. 71 The principles evolved during the course of the 1980s and early 1990s with developments such as the structural efficiency exercise, minimum rates adjustments and the introduction of enterprise arrangements. With some exceptions (such as with enterprise arrangements), as Unions NSW observed, the Commission generally modified the principles as far as possible in accordance with National decisions. However, with the introduction of the Workchoices legislation in 2006, the Commonwealth and New South Wales industrial relations systems began to diverge to the extent that applying National decisions to the New South Wales context became increasingly difficult: see State Wage Case 2006 (No 6) [2006] NSWIRComm 204; (2006) 153 IR 268. 72 Unions NSW submitted: These developments have reached the point where the Commonwealth and NSW systems are now entirely incompatible. The Commonwealth has abandoned the conciliation and arbitration model and has built a new system founded upon collective bargaining with limited statutory and award minimum conditions. In this context, wage fixing principles have been abandoned for many years. Insofar as NSW is concerned, the Commonwealth system now applies to the entirety of the private sector. By contrast, the NSW system remains one based upon conciliation and arbitration (albeit with an increasingly irrelevant enterprise bargaining facility attached), and applies almost entirely to the public and local government sectors. Thus the premises upon which the wage fixing principles were established - namely conformity with the principles that emerged from the Commonwealth arbitral system, and a NSW industrial jurisdiction which had significant application to the private sector - no longer exist. This calls for a "root and branch" reconsideration of the wage fixing principles in the context of the Commission's remaining public and local government industrial jurisdiction. 73 A focus of Unions NSW, in seeking to revise the Wage Fixing Principles, was the New South Wales Government's Wages Policy, vigorously attacked in the statements of Mr Lennon and Mr Remfrey. 74 It is true that for employees in the New South Wales public sector, State Wage Cases have been of little relevance for many years. This is because State Wage Case increases have been inapplicable to awards that have been the subject of pay increases other than safety net increases, State Wage Case adjustments or Minimum Rates Adjustments since 1991. Generally speaking, State Wage Cases have had little impact in the local government sector either because of the history of consent awards or the impact of Principle 8(g), which provides: 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 Minimum Rates Adjustment principle, since 29 May 1991. 75 Unions NSW submitted that since September 2007, the main determinant of wages and salaries adjustments for public sector employees has been the Wages Policy. Under that Policy, there is a basic increase of 2.5 per cent per annum permitted which is intended to maintain the real value of wages. As we noted earlier, any increases above this must be funded by employee-related cost offsets and approved by the Budget Committee of Cabinet. The Wages Policy makes no provision for changes in work value, or for improvements in productivity and efficiency that are not productive of direct cost reductions. 76 Mr A Hatcher of senior counsel for Unions NSW submitted: With some minor exceptions, all wages/salaries adjustments for public sector employees in the NSW industrial relations jurisdiction in recent years have occurred within the parameters of the Wages Policy. The effect of the current Wage Fixing Principles (particularly Principle 8(g)) has been to force public sector unions either to seek a wages/salaries agreement under the terms of the Wages Policy, or to run a major industrial case under the Special Case and/or Work Value Principles. For the reasons set out in the statement of evidence of Mark Lennon, the Secretary of Unions NSW, this has proved to be an unsatisfactory situation. In particular: (a) The 2.5% has applied regardless of the inflation rate and cost of living changes which have occurred, with the result that it has not served to maintain real wages/salaries. (b) Consequently, unions and their members have, in order to maintain the real value of employees' incomes, been compelled to engage in the process of identifying direct cost offsets to fund additional wage/salary increases. (c) In many cases, such offsets have been difficult to identify, or have required the surrender or diminution of existing conditions of employment and other benefits. (d) Employees have not been unable [sic] to obtain any reward through their remuneration for changes in work value, productivity or efficiency where these have not generated immediate cost savings. (e) The narrow parameters of the Wages Policy and the requirement for approval of increases above 2.5% by the Budget Committee of Cabinet has led to significant problems in negotiations, including extensive delay and a lack of negotiating authority on the part of those representing NSW Government departments and agencies. (f) The Wages Policy has been applied to State-Owned Corporations and other public sector business entities which operate commercially and are not funded by Treasury. This has meant that such entities have been prevented from entering into wages/salaries agreements which they can well afford without any burden on NSW Government finances. 77 The Minister's position regarding Unions NSW's proposals was that the current Principles, which have a rich history, have been formulated for a conciliation and arbitration system. That system remains the basis for the NSW industrial relations system. It was the Minister's view that there is no good reason to depart in any fundamental manner from the current Principles, which have served the New South Wales industrial relations system so well. 78 The DPE's position regarding the proposed Principles was that: (a) the Wage Fixing Principles have served the Commission and the parties well over long periods of time and remain relevant. They provide appropriate guidance to members of the Commission so that consistent and clear principles are applied to the matters to be determined. They also guide the parties as to what approach will be taken and what is required of the parties; (b) the current principles are not in need of significant change. The fact that the Principles will apply to a smaller number of employees remaining in the NSW jurisdiction has no substantial implications for the soundness of the Principles themselves; (c) the fact that the jurisdiction of the IRC is now largely confined to the public sector and local government is no basis for the substantial overhaul of the Principles that Unions NSW is seeking. For many years now the use of the IRC's arbitral powers to determine claims for wage increases has been largely confined to various groups within the public sector. The current Principles have generally served public sector employees well. 79 In responding to Unions NSW's attack on the Government's Wages Policy, the DPE submitted that the argument that public sector employees have their wages and salary adjustments 'unilaterally determined by their employer rather than under Wage Fixing Principles determined by the Commission' was untrue; the Government's Wages Policy provides for 2.5 per cent increases regardless of whether inflation falls above or below this rate. The objective of the policy was to maintain real wages over the long term. 80 It was submitted that since the introduction of the present policy in 2007, the Commission has approved more than 100 consent awards and enterprise agreements between the government and unions, which were negotiated under the terms of the NSW Government's Wages Policy. These awards and enterprise agreements also complied with existing Wage Fixing Principles. 81 The DPE referred in particular to the proposed Arbitrated Case Principle and Mr Lennon's assertion that parties should be able to negotiate or, to have arbitrated, additional increases based on work value, productivity, efficiency and other relevant considerations. The DPE submitted that the existing Principles and the objects of the IR Act already allow for this to occur. 82 Counsel for the DPE also referred to the proposed Negotiation Principle and Unions NSW's reasoning that the new Principle was necessary because the Government's Wages Policy has caused delays in negotiations. Mr Murphy of counsel submitted: This criticism by Unions NSW of the policy is unreasonable. The NSW Government operates as a Westminster model of government, which incorporates decision making by Cabinet and sub-committees of Cabinet, such as the Cabinet Standing Committee on the Budget (Budget Committee). Budget Committee or the Expenditure Review Committee has responsibility to approve of employment conditions bargaining parameters. Therefore, the maintenance of a Wages Policy by the Government and an appropriate decision making process are fundamental to the Government's ability to ultimately make agreements. The Government's Wages Policy has a similar role as Wage Fixing Principles. It guides Departments and other public sector agencies as to what constraints and processes apply to the making of employee agreements and instruments. … The DPE contends the Act already provides amply for the management of disputes. Under s14 of the Industrial Relations Act 1996, each award has mandatory dispute resolution procedures. By inserting such prescriptive procedures within the Principles, there is a substantial likelihood that conflict will arise between any new procedure and existing award dispute settlement procedures. It is inappropriate to set procedures within the Principles when such procedures are already provided for. For example clause 70 of the Crown Employees (Police Officers – 2009) Award sets out quite prescriptive procedural steps and provides for set time frames for dispute settlement. Similarly, Schedule A to the Crown Employees (Correctional Officers, Department of Corrective Services) Award 2008 has a very detailed dispute settlement procedure, including delegate involvement and immediate referral to the Industrial Relations Commission if the dispute is unable to be resolved. The DPE considers that the introduction of a Negotiation Principle as proposed by Unions NSW would likely add rigidity to negotiations and would likely create inconsistency with existing arrangements, most of which were established between the parties to the award or agreement by consent. The DPE contends another reason that the proposed changes to Principles are unnecessary, is that both the Government and unions have regularly accessed the 'BlueScope' process as an alternative to the arbitration process since it has become available. This process has enabled disputes to be resolved in an efficient manner. Accordingly, the DPE does not support the introduction of the Negotiation Principle. 83 The LGSA opposed the proposal of Unions NSW to abolish the existing Principles. It was submitted that Principles advanced by Unions NSW amounted to a substantial and unnecessary overhaul of the Principles without reasonable justification; that the proposed Principles restricted the discretion of the Commission in the management of industrial disputes and introduced content unrelated to wage fixing. 84 Mr Britt of counsel for the LGSA submitted: Like the DPE, the LGSA submits that the current Wage Fixing Principles have served the industrial parties, employers and employees and the NSW community well over long periods of time and remain relevant. They provide appropriate guidance to members of the Commission so that consistent and clear Principles are applied to the matters to be determined. They also guide the parties as to what approach will be taken and what is required of the parties. The LGSA submits that there is no need for the Commission to conduct a "root and branch reconsideration of wage fixing principles" and in so doing abandon at least 37 years of industrial jurisprudence (and even longer in respect to aspects of the "First Award and Extension to an Existing Award" principle (see Re Hospital Nurses (State) Award 1936 AR 582) and "work value inquiries")). The general consensus of the parties reached during the 2009 State Wage Case proceedings was that the Principles should be retained because they provide certainty and ensure consistency. Nothing has changed since that time. The Principles should be retained as they continue to provide certainty, ensure consistency and continue to serve the industrial parties well. 85 The Minister, the DPE and the LGSA addressed each of the Principles proposed by Unions NSW. In particular, the LGSA submitted the following in relation to the proposed Economic Adjustment Principle: The LGSA opposes the proposed modified offsetting arrangements contained within the Unions NSW Principle entitled "Economic Adjustment" . The proposed Principle specifically provides that the adjustment under this Principle may be offset against any consent increases that occur within the period. It is unclear from the proposed Principle whether the "period" is determined by reference to the nominal term of the consent award or the period of operation of the relevant State Wage Case. Either way, if a consent increase were less than the rate determined by the Commission, within the "specified time period", the employer would be required to top up the consent increase. This proposal fails to take into account that pay increases may be agreed to between the parties in exchange for enhancements of conditions or that the consent award could provide for both modest and generous pay increases at different times within the total term covered by the consent award. Secondly, it fails to take into account that an increase provided in one consent award appears to the parties to be overly modest in light of other matters and a subsequent consent award provides for a larger increase by way of compensation. Further, there is no basis as to why the wage arrangements in consent awards should be increased upwards as a result of an economic adjustment and not subsequently decreased where the consent award provides for a greater increase than that awarded as part of an economic adjustment. The result of introducing such a Principle would be to discourage and fetter bargaining. … The removal of the current absorption mechanism is a departure from the approach adopted by the Commission. A culture has developed in the local government sector (and elsewhere) whereby wage and condition outcomes are negotiated by the parties. It is inappropriate for the Commission to change this past practice whilst any consent awards remain within their nominal term. Further as has been consistently recognised by the Commission, it is always possible for any anomaly/inequity that may arise to be addressed through the Special Case Principle. The Unions NSW on absorption would significantly impact upon the local government sector which has had a history of consent arrangements going back until 1992. As set out in the evidence of Ms Tiddy … if such a principle were to be introduced it would significantly impact upon on [sic] future industrial negotiations in the local government sector and the result of introducing such a Principle would be to discourage and fetter bargaining. The wage outcomes in the local government sector have been negotiated to reflect a broad range of considerations that are specific to the sector. They include but are not limited to community wage movements, local government reform and productivity improvements (Affidavit of Ms Tiddy …). The 2010 Award [Local Government (State) Award 2010] was also predicated on the capacity to absorb State Wage Case increases occurring during the term of the Award (Affidavit of Ms Tiddy …). … Pursuant to the Principles developed by the Commission, the series of Local Government (State) Awards have absorbed State Wage Case and minimum rates adjustments into increases granted by the Commission since May 1991. The ability to absorb State Wage Case adjustments has ensured that the local government sector has been able to negotiate affordable wage increases that reflect its circumstances and means. This is put in peril if the Commission were to grant the Unions NSW claim in respect of absorption. 86 The AFEI opposed the principles proposed by Unions NSW. The AHA made no submissions regarding the Principles. Consideration 87 We agree with the submission of the DPE that the Wage Fixing Principles have served the Commission and the parties well over long periods of time. The rationale underpinning the Principles has not fundamentally changed. The Principles provide a coherent set of rules that ensures consistency of approach by the wage fixing tribunal and certainty and predictability in respect of the fixation of wages and the setting of employment conditions. They also ensure that employment conditions are regulated in a way that is economically sustainable. 88 There is no doubt, however, that over the 27 years since the State Wage Case 1983 circumstances have changed and whilst no party sought the abandonment of the Principles it is clear to us that the Principles are in need of refinement. 89 The Principles have developed over time in the context of relevant economic, industrial and social circumstances. Any change to the existing Principles needs to continue to have regard to the relevant contemporary circumstances. 90 With the transfer of the private sector to the federal jurisdiction, the public sector now makes up the bulk of the Commission's jurisdiction. It is estimated that the number of public sector employees subject to the Commission's jurisdiction is in the order of 320,000. 91 In respect of those employees, the government has chosen to apply a Wages Policy. Although that Policy finds no favour with unions, indeed the unions have strongly condemned it and have submitted that it is a Policy that will be unworkable in any future wages round, it is a Policy the government is entitled to promulgate and pursue. In developing Wage Fixing Principles, the Policy is an important part of the industrial context that needs to be factored in. 92 A further context is the more favourable economic conditions that currently prevail, combined with public sector awards being of a substantially paid rates nature. If, of course, the context changes so may any wage fixing principles. 93 The other major sector subject to the Commission's jurisdiction is local government which consists of about 44,000 employees. Obviously, any new Principles have to be designed to cater for this important sector. The local government sector has an enviable record of consent awards stretching back to 1992. Nothing that is proposed should affect the arrangements in that industry that have benefited employers and employees alike over a long period of time. 94 With these considerations in mind, we have drafted a proposal for a new set of Wage Fixing Principles and, in doing so, have had regard to the submissions and proposals of Unions NSW, the Minister, the DPE and LGSA. The draft is for discussion purposes and the parties will be provided with the opportunity of considering it and expressing their views in relation to it early in 2011. Until they are replaced, the existing Principles, subject to the necessary amendments arising from this decision, will continue to apply. Those existing amended Principles are set out in Appendix A to the decision. The draft proposed Principles are set out in Appendix B. The present intention is that any new Principles will apply to claims made after 1 March 2011. 95 In relation to the draft proposed Principles in Appendix B. The Preamble replaces the preamble in the existing Principles, which lacks relevance. The new preamble sets out the four primary aims of the proposed Principles: 1.2.1 to provide a framework under which wages and employment conditions in the government and local government sectors of New South Wales remain fair and reasonable in accordance with the requirements of the Industrial Relations Act , and economically sustainable having regard to the obligation of the Commission to take into account the public interest and, in doing so, have regard to the objects of the Industrial Relations Act and to the state of the economy of New South Wales and the likely effect of the Commission's decisions on that economy; 1.2.2 to provide a framework that accommodates the interests of employers and employees and their representatives and ensures consistency of approach and certainty and predictability as to the principles that are to operate in respect of the fixation of wages and the setting of employment conditions; 1.2.3 to provide a framework in which all operative and non-operative awards within the Commission's jurisdiction are maintained up to date in respect of rates of pay and allowances; and 1.2.4 to protect the low paid. 96 The proposed Principle 2 deals with the circumstances when an award may be varied or another award made without the claim requiring consideration as an 'Arbitrated Case'. We will refer shortly to the new 'Arbitrated Case' Principle (proposed Principle 8). Proposed Principle 2 is in much the same terms as the existing Principle except it incorporates existing Principle 3 - Previous State Wage Case Increases. 97 Proposed Principle 3 adopts the language of the existing Principle 4 - Test Case Standards. Proposed Principle 4 - State Wage Case Adjustments adopts the Minister's proposed Principle, with minor changes. Proposed Principle 5 - Adjustment of Allowances and Service Increments, essentially retains the existing Principle 5 with the latest increase of 4.25 per cent being inserted. Proposed Principle 6 - Award Review Classification Rate, adopts the present Principle 9 except that the rate is $592.30. 98 Proposed Principle 7 - Minimum Wage for Award/Agreement Free Employees, is the Principle proposed by the Minister with some minor changes. Proposed Principle 8 - Arbitrated Case, addresses those claims for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the Principles. Such claims are to be processed as an Arbitrated Case by a Full Bench of the Commission unless otherwise allocated by the President. Claims under this proposed Principle may be made on the basis of a change in work value, productivity and efficiency improvements and on the basis of a special case. Whilst the DPE accepted that claims based on productivity and efficiency improvements were already permissible under the existing Special Case Principle, we think it is important to make it clear just what the criteria are for such claims and to ensure that claims brought on that basis do not need to be made out as a special case (such claims being treated in a similar manner to work value claims). 99 Claims that are based substantially on comparative wage justice, attraction and retention or community standards will not be countenanced except as provided in Re Public Hospital Nurses (State) Award (No 3) [2002] NSWIRComm 325; (2002) 121 IR 28 and Re Health Employees Pharmacists (State) Award [2003] NSWIRComm 453; (2003) 132 IR 244. 100 We have also included proposed Principle 9 - Negotiating Principles. We consider there is merit in Unions NSW's proposal, although we have not wholly embraced that body's proposed Principle. It was the Commission's experience that considerable and unreasonable delay was caused by those representing some government departments and agencies in the 2008 and 2009 negotiations. This was most evident in the police negotiations. A reasonable set of rules guiding the parties in their approach to negotiations should avoid a repeat of some of the problems that plagued previous negotiating rounds. 101 Proposed Principle 10 - Enterprise Arrangements, adopts the existing Principle, as does Principle 11 - Superannuation, Principle 12 - Equal Remuneration and Other Conditions, and Principle 13 - Economic Incapacity. Proposed Principle 14 - Current Awards not Affected, provides that the proposed Principles will not apply to awards that are still within their nominal term on the date the Principles commence to operate. In such cases the earlier Principles will apply. 102 The proposed draft Principles do not include a Standard Hours Principle or a First Award Principle as these appear to be obsolete. We also have some reservations about the utility of retaining the Superannuation Principle. 103 The Full Bench will reconvene at 10.00 am on Thursday, 17 February 2011 to hear the parties' response to the draft proposed Principles. The parties will each provide a written outline of their response at least seven days prior to the hearing. These proceedings will be concerned only with constructive observations. 104 The general orders have been fashioned so as to conform with the Principles stipulated in Appendix A because of the timing of the making of the orders. After the operation of the new Principles the form of the general orders may require variation. ORDERS 105 The Full Bench makes the following orders: (1) Pursuant to s 51(1) of the IR Act, the Commission orders that the Commission's Wage Fixing Principles shall be as set out in Appendix A to this decision. (2) Pursuant to s 52 of the IR Act and consistent with Principle 8 of the Commission's Wage Fixing Principles, the Commission orders that all awards are hereby varied by increasing the following monetary sums by a State Wage Case adjustment of 4.25 per cent other than those awards which contain wage increases awarded since 29 May 1991 which were not safety net, State Wage Case or minimum rates adjustments: (i) Existing adult wage rates; (ii) Existing monetary allowances, including shift allowances expressed as monetary amounts and service increments; and (iii) Junior rates expressed as monetary amounts. (3) The following clause is inserted in each relevant award: 'The rates of pay in this award include the adjustments payable under the State Wage Case 2010 . 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 replaces the offsetting clause inserted into awards pursuant to the Principles determined in the State Wage Case 2009 decision. (4) Pursuant to s 52 of the IR Act, the Award Review Classification Rate is increased by $24.10 to $592.30. (5) Pursuant to s 52 of the IR Act, the Commission orders that: (i) The minimum weekly rate of pay payable to an adult employee (as defined in s 5 of the IR Act) engaged on a full-time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the IR Act) shall be an amount of $569.90 as varied from time to time by the Commission; (ii) The minimum hourly rate of pay payable to an adult employee (as defined in s 5 of the IR Act) engaged on a part-time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the IR Act) shall be an amount of $569.90, as varied from time to time by the Commission divided by 38; (iii) The Order in paragraph (4) will not apply to those employees who are trainees, apprentices or employees on a supported wage or those employees employed on annual remuneration which is greater than the amount specified in reg 12.3 of Chapter 2 of the Workplace Relations Regulations 2006 of the Commonwealth from time to time or that amount as indexed from time to time in accordance with reg 12.6 of Chapter 2 of those Regulations; (6) Orders (1), (2), (3), (4) and (5) shall operate on and from the date of this decision and shall be in force until further order of the Commission. DIRECTIONS 106 The Full Bench makes the following directions: (1) The parties will respond to the draft proposed Principles set out in Appendix B to this decision at a directions hearing before the Full Bench at 10.00 am on Thursday, 17 February 2011. (2) The parties will each file and serve a written outline of their response at least seven days prior to the hearing. (3) The parties will attend a directions hearing before Walton J, Vice-President at 9.30 am on Thursday, 24 February 2011 for the purpose of receiving directions as to the process and the timetable for the s 19 review. _____________________________________ APPENDIX A INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES STATE WAGE CASE 2010 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 adjustment 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 is varied (by the General Order made in the State Wage Case 2010) or may be varied as the case may be, 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 2010 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, are increased by 4.25 per cent for the State Wage Case 2010 adjustment. (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 classification 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 (1989) 30 IR 107. (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. (j) In arbitrating an application made under this Principle, the Commission is required to determine whether or not future State Wage Case general increases will apply to the award. 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 2010 decision, all relevant NSW awards are varied to include a State Wage Case adjustment of 4.25 per cent (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 s 125 of the Act), subject to the following: (a) The following clause is inserted in each relevant award: 'The rates of pay in this award include the adjustments payable under the State Wage Case 2010 . 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 replaces the offsetting clause inserted into awards pursuant to the Principles determined in the State Wage Case 2009 decision. (b) 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. (c) The State Wage Case adjustment is only 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 Minimum Rates Adjustment principle, since 29 May 1991. (d) The State Wage Case adjustment may apply where the rates in an award have increased under the Work Value and/or Equal Remuneration Principles in accordance with the Commission's decision as set out in Principles 6(j) and 14(p) respectively. 9. Award Review Classification Rate The Award Review Classification Rate of $592.30 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 $592.30 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 s 17(3) of the Act. (c) Where no agreement is reached with respect to (a) above, the Commission shall re-list 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(s). 9A. Minimum Wage (a) The Minimum Wage shall apply to those adult employees who are employed in the jurisdiction of the Commission and whose employment is not subject to the terms of an industrial instrument. (b) The minimum weekly rate of pay payable to an adult employee (as defined in s 5 of the Act) engaged on a full time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the Act) is $569.90, as varied from time to time by the Commission. (c) The minimum hourly rate of pay payable to an adult employee (as defined in s 5 of the Act) engaged on a part-time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the Act) is $569.90, as varied from time to time by the Commission divided by 38. (d) The Minimum Wage will not apply to those employees who are trainees, apprentices and employees on a supported wage or those employees employed on an annual remuneration which is greater than the amount specified in regulation 12.3 of Chapter 2 of the Workplace Relations Regulations 2006 of the Commonwealth from time to time or that amount as indexed from time to time in accordance with regulation 12.6 of Chapter 2 of those Regulations. 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 provisions of any award or order of the Commission that deals with the same matters insofar 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 (e.g. 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. 12. 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 s 124 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 (e.g. '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 s 124 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 State 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 s 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 under-valuations 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 a 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. (p) In arbitrating an application made under this Principle, the Commission is required to determine whether or not future State Wage Case general increases will apply to the award. 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. _____________________________________ APPENDIX B DRAFT ONLY INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES STATE WAGE CASE 2010 DRAFT PROPOSED WAGE FIXING PRINCIPLES 1. Preamble 1.1 These principles have been developed to accommodate the changing nature of the jurisdiction of the Industrial Relations Commission of New South Wales under the Industrial Relations Act 1996 ('the Act') in light of the creation of a national system of private sector employment regulation, relevantly established by the Industrial Relations (Commonwealth Powers) Act 2009, the Industrial Relations Amendment (Consequential Provisions) Act 2010, the Fair Work Act 2009 (Cth) and the Fair Work (State Referral and Consequential and Other Amendments) Act 2009 (Cth). 1.2 The four primary aims of these principles are: 1.2.1 to provide a framework under which wages and employment conditions in the government and local government sectors of New South Wales remain fair and reasonable in accordance with the requirements of the Act, and economically sustainable having regard to the obligation of the Commission to take into account the public interest and, in doing so, have regard to the objects of the Act and to the state of the economy of New South Wales and the likely effect of the Commission's decisions on that economy; 1.2.2 to provide a framework that accommodates the interests of employers and employees and their representatives and ensures consistency of approach and certainty and predictability as to the principles that are to operate in respect of the fixation of wages and the setting of employment conditions; 1.2.3 to provide a framework in which all operative and non-operative awards within the Commission's jurisdiction are maintained up to date in respect of rates of pay and allowances; and 1.2.4 to protect the low paid. 1.3 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 an Arbitrated Case 2.1 In the following circumstances an award may, on application, be varied or another award made without the application requiring consideration as an Arbitrated Case under Principle 5: (a) to include previous State Wage Case increases in accordance with Principle 2.2; (b) to incorporate test case standards in accordance with Principle 3; (c) to adjust wages for the State Wage Case 2010 in accordance with Principle 4; (d) to adjust allowances and service increments in accordance with Principle 5; (e) where the application is consented to by the parties it will be dealt with in terms of the Act; (f) to approve an enterprise arrangement reached in accordance with Principle 10; and (g) to adjust wages pursuant to an application claiming that work has been undervalued on a gender basis in accordance with Principle 12. 2.2 Applications for increases available under previous State Wage Case decisions will be determined in accordance with the relevant principles contained in those decisions. 3. 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. 4. State Wage Case Adjustments 4.1 Following the completion of an Annual Wage Review by Fair Work Australia, the Commission shall issue a notice to show cause why that decision should not be flowed on to relevant New South Wales awards (as per 4.3(c) of this Principle) in the New South Wales industrial jurisdiction. 4.2 Subject to s 50(1) of the Act, if there are no written objections from any of the parties to the flow on of the Fair Work Australia decision then the Commission may issue a general order 'on the papers' for that decision to apply to all relevant New South Wales awards. 4.3 Unless the Commission determines otherwise, all relevant New South Wales awards will be varied to include a State Wage Case adjustment by the making of a general order of the Commission pursuant to s 52 of the Act, subject to the following: (a) 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 s 125 of the Act), the following clause will be inserted in the award: 'The rates of pay in this award include the adjustments payable under the State Wage Case 2010 . These adjustments may be offset against: (i) any equivalent overaward payments, and/or (ii) award wage increases other than State Wage Case adjustments.' The above clause will replace the offsetting clause inserted into awards pursuant to the Principles determined in the State Wage Case 2009 decision. (b) 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. (c) The State Wage Case adjustment will only be made in respect of rates in awards which have not been increased, other than by State Wage Case adjustments. (d) The State Wage Case adjustment may apply where the rates in an award have increased under the Arbitrated Case and/or Equal Remuneration Principles in accordance with the Commission's Decision as set out in Principles 8.2(l) and 12.16 respectively. 5. Adjustment of Allowances and Service Increments 5.1 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. 5.2 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 4.25 per cent for the State Wage Case 2010 adjustment. 5.3 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 Arbitrated Case Principle if there is no consent. 5.4 New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses. 5.5 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 Arbitrated Case Principle. 5.6 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 Arbitrated Case Principle. 6. Award Review Classification Rate 6.1 The Award Review Classification Rate of $592.30 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. 6.2 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 s 17(3) of the Act. (c) Where no agreement is reached with respect to (a) above, the Commission shall re-list 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(s). 7. Minimum Wage for Award/Agreement Free Employees 7.1 The Minimum Wage shall apply to those adult employees, junior employees, employees to whom training arrangements apply and employees with a disability who are employed in the jurisdiction of the Commission and whose employment is not subject to the terms of an industrial instrument. 7.2 The minimum weekly rate of pay payable to an adult employee (as defined in s 5 of the Act) engaged on a full-time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the Act) shall be the rate of pay equal to the National Minimum Wage, as varied from time to time by the Commission. 7.3 The minimum hourly rate of pay payable to an adult employee (as defined in s 5 of the Act) engaged on a part-time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the Act) shall be the rate of pay equal to the National Minimum Wage, as varied from time to time by the Commission divided by 38. 7.4 Unless the Commission otherwise determines, the minimum weekly rate of pay for junior employees, employees to whom training arrangements apply and employees with a disability (as defined by s 12 of the Fair Work Act 2009 (Cth)) engaged on a full-time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the Act) shall be the rate of pay equal to the special National Minimum Wage as per s 294(1)(b) of the Fair Work Act 2009 (Cth), as varied from time to time by the Commission. 7.5 Unless the Commission otherwise determines, the minimum hourly rate of pay for junior employees, employees to whom training arrangements apply and employees with a disability (as defined by s 12 of the Fair Work Act 2009 (Cth)) engaged on a part time basis whose employment is not subject to the terms of an industrial instrument (as defined in s 8 of the Act) shall be the rate of pay equal to the special National Minimum Wage as per s 294(1)(b) of the Fair Work Act 2009 (Cth), as varied from time to time by the Commission divided by 38. 7.6 Casual loadings (if applicable) for adult employees, junior employees, employees to whom training arrangements apply and employees with a disability who are award or agreement free will be adjusted in line with s 294(1)(c) of the Fair Work Act 2009 (Cth), as varied from time to time by the Commission. 8. Arbitrated Case 8.1 General 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 an Arbitrated Case by a Full Bench of the Commission unless otherwise allocated by the President. In determining such an application, the Commission shall, subject to the relevant provisions of the Act, do so in accordance with the following criteria: 8.2 Work Value Considerations (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. (b) In addition to meeting the test in (a), 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 any external classification to which that structure is related. There must be no likelihood of wage leapfrogging arising out of changes in relative position. (c) The foregoing circumstances are the only ones 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. (d) 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. (e) 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. (f) 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 (1989) 30 IR 107 or the last work value inquiry, whichever is the later. (g) 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. (h) 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. (i) The expression ' the conditions under which the work is performed ' relates to the environment in which the work is done. (j) The Commission will guard against contrived classifications and over-classification of jobs. (k) 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. (l) In arbitrating an application made under this Principle, the Commission is required to determine whether or not future State Wage Case general increases will apply to the award. 8.3 Productivity and Efficiency Considerations Productivity and efficiency measures that have delivered substantial costs savings and/or productivity or efficiency improvements or which have made a substantial contribution towards the attainment of the objectives of the employer (including departments and agencies of the Crown) in seeking to become more competitive and/or efficient, to which employees have made a significant contribution, may constitute the basis for increases to wages and salaries or improvements in employment conditions without the requirement to make out a special case, provided that such measures, savings or improvements have not already been taken into account in previous wage adjustments. 8.4 Special Case Considerations 8.4.1 A claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the Principles, and which is not based on work value and/or productivity and efficiency pursuant to this Principle, will be processed as a special case in accordance with the principles laid down in Re Operational Ambulance Officers (State) Award [2001] NSWIRComm 331; (2001) 113 IR 384 and the cases referred to therein at [165]-[168]. 8.4.2 All special cases shall be tested against the public interest. 8.5 Exclusions 8.5.1 Claims that are based substantially on comparative wage justice, attraction and retention or community standards will not be countenanced except as provided in Re Public Hospital Nurses (State) Award (No 3) [2002] NSWIRComm 325; (2002) 121 IR 28 and Re Health Employees Pharmacists (State) Award [2003] NSWIRComm 453; (2003) 132 IR 244. 8.5.2 There shall be no double counting, provided, however, that an Arbitrated Case claim may rely upon a cumulation of the factors referred to in this Principle. 9. Negotiating Principles 9.1 In order to encourage participation in industrial relations by representative bodies of employees and employers, avoid industrial disputes, provide a prompt and fair manner for their resolution with a minimum of legal technicality, and to encourage and facilitate co-operative workplace reform, the following processes shall be followed with respect to claims under Principles 8 and 12. 9.2 In respect of the commencement of negotiations for a new award: (a) At least three months before the nominal expiry date of an award a party to the award must notify the Commission (in the process of a major industrial case as contemplated by Practice Direction 8A) and the other parties to the award that it is their intention to enter into negotiations for a new award. (b) The parties to the award shall begin negotiations as soon as is practicable after the notification has been given. In this regard, once a written claim has been made by one party on another party, negotiations should begin within a reasonable period of time unless it is agreed by the parties to postpone the commencement of negotiations to a later time. (c) Disputes about these procedures shall be dealt with in accordance with the relevant dispute resolution procedure. 9.3 Subject to the provisions of the Act, there shall be no arbitration unless the parties have bargained beforehand in good faith and, in particular, the parties have: (a) attended meetings they have agreed to attend and been represented at the negotiations by persons capable of making decisions on that parties' behalf regarding the contents of the new award, and (b) complied with agreed or reasonable negotiating procedures, and (c) disclosed relevant information for the purposes of negotiation, and (d) responded to each other's claims and/or counter claims in a reasonable and timely manner. 9.4 The Commission may assist the parties in reaching agreement. The Commission may provide such assistance in respect of a dispute when a request is made by any party or on its own motion. 9.5 The Commission may exercise conciliation powers under the Act, and in that connection may, at the request of all the parties to a dispute, engage in a 'Bluescope' process: see Construction, Forestry, Mining and Energy Union (New South Wales Branch) and Macquarie Generation [2009] NSWIRComm 160; Re Operational Ambulance Officers (State) Award [2008] NSWIRComm 168; Minister for Industrial Relations (Notification under s 167 of a dispute between BHP Billiton) and The Australian Workers Union [2002] NSWIRComm 378; Crown Employees (NSW Fire Brigades Permanent Firefighting Staff) Award 2008 [2008] NSWIRComm 174; and Re Crown Employees (Public Sector - Salaries 2008) Award [2008] NSWIRComm 193. 9.6 If conciliation fails, and the parties do not elect for the 'Bluescope' process, the Commission may arbitrate consistent with the powers under the Act and these Principles. 10. Enterprise Arrangements 10.1 The Commission may approve of enterprise arrangements reached in accordance with this Principle and the provisions of the Act. 10.2 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 provisions of any award or order of the Commission that deals with the same matters insofar 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. 10.3 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 Principle 10.2. 10.4 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. 10.5 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: (a) vary an award in accordance with the Act; or (b) make a new award in accordance with the Act. 10.6 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: (a) ensuring the arrangement does not involve a reduction in ordinary time earnings and does not depart from Commission's standards of hours of work, annual leave with pay or long service leave with pay; and (b) whether the proposed award or variation is consistent with the continuing implementation at enterprise level of structural efficiency considerations. 10.7 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. 10.8 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: (a) All employees will be provided with the current prescriptions (e.g. award, industrial agreement or enterprise agreement) that apply at the place of work. (b) The arrangement shall be committed to writing and signed by the employer, or the employer's duly authorised representative, with whom agreement was reached. (c) 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 or persons eligible for membership in that enterprise who are affected by the changes and the employer association, if any, of which the employer is a member. (d) 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. (e) 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. (f) A union and/or employer association shall not unreasonably withhold consent to the arrangements agreed upon by the parties. (g) 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. (h) Such arrangement once approved shall be displayed on a notice board at each enterprise affected. 11. Superannuation 11.1 An application to make or to vary a minimum rates or paid rates award which: (a) seeks a greater quantum of employer contributions than required by the Superannuation Guarantee (Administration) Act 1992 (Cth) ('the SGA Act'); or (b) 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 Principle. 11.2 If an application is made that does not fall within Principle 11.1, the Commission will, subject to Principle 11.3: (a) 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 s 124 of the Industrial Relations Act 1996. This legislation, as varied from time to time, governs the superannuation rights and obligations of the parties'. (b) if appropriate, ensure that the award contains specification of an employee's earnings (e.g. 'ordinary time earnings') which, for the purposes of the SGA Act, will operate to provide a 'notional earnings base', and (c) 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. 11.3 The Commission may award provisions which differ from those in Principle 11.2: (a) by consent; or (b) 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: (i) the wishes of the parties; (ii) the nature of the particular industry or enterprise; (iii) the history of the existing award provisions; (iv) relevant decisions of the Commission establishing superannuation principles; and (v) relevant statutory provisions. 11.4 Before any different provisions are awarded under Principle 11.3, 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. 11.5 Subject to s 124 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. 11.6 In determining applications as to specification of a fund, the Commission will, as appropriate: (a) ensure that any fund specified by it is one into which payment will meet the employer's obligations under the SGA Act; (b) 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; (c) have regard to previous decisions of the Commission with respect to the specification of a fund or funds; and (d) have regard to relevant statutory provisions. 11.7 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. 12. Equal Remuneration and Other Conditions 12.1 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. 12.2 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. 12.3 Where the under-valuation 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. 12.4 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. 12.5 The assessment of wage rates and other conditions of employment under this Principle is to have regard to the history of the award concerned. 12.6 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. 12.7 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. 12.8 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. 12.9 Any changes made to the award as a result of this assessment may be phased in and any increase in wages may be absorbed in individual employees' overaward payments. 12.10 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. 12.11 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. 12.12 The expression ' the conditions under which the work is performed ' has the same meaning as in Principle 8.2, Work Value Considerations. 12.13 The Commission will guard against contrived classification and over-classification of jobs. It will also consider: (a) the state of the economy of New South Wales and the likely effect of its decision on the economy; (b) the likely effect of its decision on the industry and/or the employers affected by the decision; and (c) the likely effect of its decision on employment. 12.14 Claims under this Principle will be processed before a Full Bench of the Commission, unless otherwise allocated by the President. 12.15 Equal remuneration shall not be achieved by reducing any current wage rates or other conditions of employment. 12.16 In arbitrating an application made under this Principle, the Commission is required to determine whether or not future State Wage Case general increases will apply to the award. 13. Economic Incapacity 13.1 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 an 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. 13.2 Such an application shall be processed according to the Special Case Principle. 13.3 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. 14. Current Awards not Affected These Principles will not apply to awards that are still within their nominal term on the date the Principles commence to operate. In such cases the earlier Principles will apply. 15. 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.