Industrial Relations Commission of New South Wales CITATION: Building and Construction Industry (State) Award, Re [2006] NSWIRComm 387 APPLICANT: Construction, Forestry, Mining and Energy Union (New South Wales Branch) RESPONDENTS: PARTIES: Master Builders Association of NSW Building Industry Specialist Contractors Association of NSW Inc Housing Industry Association Australian Business Industrial Employers First FILE NUMBER(S): IRC 5815 of 2005 CORAM: Wright J President; Walton J Vice-President; Grayson DP CATCHWORDS: Award - variation of award - rates of pay - apprentices and trainees - special case - application with consent of all interests but one minor interest - relevant principles - comprehensive conciliated settlement - consent not determinative but relevant - minor interest entitled to consideration - matter of degree in the circumstances - whether just and reasonable settlement - special attributes out of the ordinary - skills shortage affecting work value and public interest - competency based training - consequences for work value - changing demographics - apprentices older - higher educational levels - substantial basis in merit for increases - consent of major parties - minor interest objections not sustained by evidence - decision of Australian Fair Pay Commission not relevant to decision - variation to award made. LEGISLATION CITED: Industrial Relations Act 1996 Workplace Relations Act (1996) (Cth) Carpenters and Joiners and Bricklayers, Construction (State) Award [1968] AR (NSW) 32 Crown Employees (Administrative and Clerical Officers) (State) Award (No 2) (1993) 52 IR 243 Health Employees Pharmacists (State) Award and other Awards (2003) 132 IR 244 Operational Ambulance Officers (State) Award (2001) 113 IR 384 CASES CITED: Public Hospital Nurses (State) Award (No 3) (2002) 121 IR 28 Social and Community Services Employees (State) Award (2001) 113 IR 119 State Wage Case (No 6) [2006] 153 IR 268 Transport Industry (State) Award (1996) 95 IR 126 Transport Industry (State) Award (2000) 95 IR 232. HEARING DATES: 29/8/2006, 30/8/2006, 31/8/2006, 1/9/2006, 8/9/2006, 2/11/2006 DATE OF JUDGMENT: 12/08/2006 Mr S Maxwell and Mr S Marshall Construction, Forestry, Mining and Energy Union (New South Wales Branch) Mr A Britt of counsel Master Builders Association of NSW (Mr P Glover) Mr I Warren LEGAL REPRESENTATIVES: Building Industry Specialist Contractors Association of NSW Inc Mr G Simpson Housing Industry Association Mr G Jervis Australian Business Industrial Ms P Brunner Employers First JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President WALTON J, Vice-President GRAYSON DP Friday 8 December 2006 Matter No IRC 5815 of 2005 BUILDING AND CONSTRUCTION INDUSTRY (STATE) AWARD Application by Construction, Forestry, Mining, and Energy Union (New South Wales Branch) for variation re deleting clause 18.1.2.1 DECISION OF THE COMMISSION [2006] NSWIRComm 387 1 This matter has its genesis in the voluminous application by the Construction, Forestry, Mining and Energy Union (New South Wales Branch) ("the CFMEU") for the wholesale reconstruction of the existing provisions of the Building and Construction Industry (State) Award ("the Award") that relate to apprentices and trainees. The application was referred to the Full Bench as a Special Case within the meaning of the Wage Fixing Principles. 2 Following a conciliated settlement with the Master Builders Association of New South Wales ("MBA"), Building Industry Specialist Contractors Organisation of NSW ("BISCO"), Australian Business Industrial ("ABI") and Employers First, the CFMEU was granted leave (without objection) to file an amended application seeking to vary the Award in a narrower manner than originally sought. This application proceeded upon the basis of certain undertakings given by each of the consenting parties as to the way forward and after all parties were given the opportunity to file further evidence and submissions in light of the amended application. 3 The Housing Industry Association ("HIA") opposes the amended application although concedes that for the purposes of the application, its interest is a minor one. Relevant principles 4 We consider that the principles applicable to our approach in this matter are those laid down in Re Transport Industry (State) Award (1996) 95 IR 126 and Re Transport Industry (State) Award (2000) 95 IR 232, which in turn derive, in part, from Re Carpenters and Joiners and Bricklayers, Construction (State) Award [1968] AR (NSW) 32. These principles relate to the situation, as is the case in these proceedings, where the Commission is asked to approve an award (or an alteration to an award) that has been formulated by agreement between the relevant union (or employee representative body) and the major employer interests with one or more other employers objecting, or not consenting, to the making of the award (or the alteration). 5 Before proceeding to the subject matter of the application, we propose to briefly crystallise those principles: (a) consent of the parties to the application is important but is not determinative as the Commission must nevertheless properly exercise its award-making powers; (b) the proportion of the industry, either consenting or in opposition, is a relevant factor. As stated in Carpenters (at 36): Moreover, in deciding whether the settlement is reasonable we should neither overlook, nor be overwhelmed by, the fact that the union and the major employer organization are prepared to accept the agreement as a just settlement of the claim and that the governmental bodies we have mentioned do not oppose. It is a question less of majority rule than of paying regard to the vast pool of experience involved in the majority view. But this cannot be decisive. (c) the minority opposition is entitled to full consideration and the weight to be attributed to an interest will be a matter of degree in the circumstances of the case; (d) the agreement should be wholly approved or wholly rejected. As expressed in Carpenters (at 35) : We are convinced that either the award should go into force and be of general application in the construction industry or it should not go into force at all and we should state publicly our disapproval of it as a settlement. (e) in approving an agreement, the Commission must examine every element of the agreement, including its common rule effect, and find that it is suitable for adoption and appropriate to be imposed on non-consenting parties. The Full Bench expressed this in Carpenters (at 35) in the following terms: These are vexing alternatives because one course would prevent the minority interests from exercising what normally would be their right and the other would deprive the great majority of these tradesmen in the construction industry, at least for a substantial period of time, of what they have been led to expect by the agreement. We feel that, faced with this special problem, the Commission must resolve the matter by deciding for itself whether, in all the circumstances, this is a reasonable settlement and, if it should allow it to operate as an award. And further at 36: And where, as here, there is consent to the claim by the employer party with the major interest in the industry and non-opposition by these governmental bodies, the requirements of s32 are satisfied if the industrial authority has before it sufficient material to decide whether the proposed award represents a just and reasonable settlement having regard to the interests of the parties and the public … what we have to decide in the ultimate is whether the public interest requires us to refuse to make this award. (f) the Commission is not precluded, in an appropriate case, from deciding that an award should be made over the objection of a particular employer or group thereof; indeed, a special case does not require consent at all: see Re Transport Industry (1996) at 131; and (g) if a case is made out to be "special", it is to be determined according to its circumstances and the Commission must be satisfied that the case is not an ordinary one, but has special attributes which warrant its approval despite the restrictive considerations imposed generally by the principles of wage fixation. 6 We note that there was an attempt by the HIA to distinguish this matter from these authorities on the basis that in Re Transport Industry there was employer evidence to the effect that there was real value in the off-setting provisions in the relevant award, whereas in the present proceedings there are no offsetting provisions under which the apprentices are required to take on additional obligations as part of the higher wage rates. We do not consider that this difference differentiates the present proceedings nor do we consider it to be the foundation on which the decision in Re Transport Industry is based. 7 In this regard, we also agree with the submissions of the CFMEU and the MBA that, while the variation of the Award before the Commission is only directed to rates of pay, that variation must be considered in the context of the comprehensive consolidated settlement under which the relevant parties have made a number of undertakings pertaining to matters affecting apprentices and trainees, including: (a) the parties to the settlement making a joint approach to the New South Wales Government seeking an agreement that wages paid to apprentices be exempt from payroll tax and workers compensation premiums (we were advised that the Government has been particularly responsive in that respect); (b) the claim for the introduction of competency based progression in the Award not be pursued during the life of the Award except by consent of the parties as the CFMEU would forgo pressing its claim for such progression for this period; (c) the Award will expire on 1 December 2008; and (d) an acknowledgment by all parties that the settlement recognises that the increases in apprenticeship pay rates reflect all work value changes from the work of apprentices at the time the Award is made including the provision of competency based training to apprentices and changes in the age/education profile of apprentices. 8 We are satisfied that, even if off-setting provisions are critical, the undertakings forming part of the comprehensive conciliated settlement involve compromise by all parties, including the CFMEU. In this regard, the submissions of the MBA are relevant. The MBA submitted that the entire settlement has provided a considerable degree of certainty and has provided all of the parties, as well as the relevant training organisations, time to design, develop, plan for and introduce competency based progression. The MBA contended that this was of considerable value for all of the industrial parties. 9 Mr Simpson, who appeared for HIA, also sought to distinguish Re Transport Industry on the basis that, in Re Transport Industry, the employer evidence in support of the award variations impressed the Commission, whereas in the present proceedings no apprentice gave evidence in support of the application. Again, we do not accept that this distinguishes the present proceedings from Re Transport Industry because there is, as we will discuss, cogent evidence before us to support the application. In any event, it seems to us axiomatic that apprentices would support higher rates of pay - particularly given anecdotal evidence in the HIA survey to the effect that some apprentices could not live on the current apprentice wage rates. Special case 10 The CFMEU has brought its amended application as a "special case" and it is incumbent on the CFMEU to satisfy the Commission that it is appropriate to bring the application as a special case. 11 The principles relevant to determining whether a particular case is a "special case" are now well settled: see Health Employees Pharmacists (State) Award and other Awards (2003) 132 IR 244; Re Operational Ambulance Officers (State) Award (2001) 113 IR 384; Re Social and Community Services Employees (State) Award (2001) 113 IR 119, Re Transport Industry (1996) and Re Crown Employees (Administrative and Clerical Officers) (State) Award (No 2) (1993) 52 IR 243. 12 For present purposes, it is instructive to briefly restate three principles relevant to this question: (a) to make a special case, the applicant must demonstrate that the case is not an ordinary one, but has special attributes which warrant its approval despite the restrictive considerations imposed generally by the principles of wage fixation: see Transport Industry (1996) at 130; (b) an applicant to a special case needs to establish an "adequate evidentiary foundation" for the special factors which warrant an award variation in order to set fair and reasonable conditions of employment, although in doing so, the applicant is not required to meet a higher onus or standard of proof: Operational Ambulance Officers at 168; and (c) notwithstanding the special case principle, the conditions of employment need to be ultimately tested against the requirements of s10 of the Industrial Relations Act 1996 ("the Act"), namely whether the award sets fair and reasonable conditions of employment for employees. 13 At the outset, we are satisfied that the CFMEU has plainly made out a special case for the reasons it and the MBA contended and those contentions were supported by the evidence presented. The principal reasons presented were: (a) there is a skills shortage and it is difficult to retain apprentices in the industry to the completion of their apprenticeship, where there is a drop out rate of approximately 50 per cent. The HIA evidence (presented by Ms Lesley Brooks) was that the termination rate for apprentices engaged by the HIA was almost 40 per cent in a single year. While there are many reasons why an apprentice does not complete an apprenticeship, one of which is salary. Whilst a skills shortage, of itself, is not sufficient to justify a special case: see Health Employees Pharmacists at [54], the Full Bench in Pharmacists was satisfied that a special case was made out on the basis of staff shortages because of the impact of the shortages on work value and the nature of the work being performed. We consider that the CFMEU has similarly established a special case on the basis that the skills shortage has significantly altered the contribution of apprentices in their jobs, with apprentices being expected to carry out a full range of duties at an earlier stage of their apprenticeship. We observe also that there is a clear public interest in ensuring there is sufficient trained personnel in the building industry and that this also provides a basis for taking a skills shortage into account in determining whether a special case is made out: see Health Employees Pharmacists at [55] and Public Hospital Nurses (State) Award (No 3) (2002) 121 IR 28; (b) there have been substantial changes to the apprenticeship system over the last 40 years - the introduction of competency based training has meant that the productivity and competence of apprentices arising from their off the job training is greater than under the old system, conferring benefits on both the apprentice and the employer. The evidence revealed that apprentices are now expected to be more equipped at earlier stages of their apprenticeship and given the competency based nature of the training are expected to become proficient in a wider set of skills earlier than they might otherwise have done; (c) apprentices are generally older on commencement. The CFMEU tendered evidence in the form of the Department of Education and Training figures that showed that the average age of commencement for an apprentice has increased from 17.5 years in 1985 to almost 19 years of age in 2005. This evidence was consistent with the evidence presented by HIA that the average age profile for new apprentices is 19 years. The HIA also presented evidence that individuals who had completed a pre-apprenticeship, had a car licence and vehicle were more likely to be employed by HIA. The evidence of Lesley Brooks, for HIA, was that these attributes mean that greater productivity is achieved from those apprentices; (d) apprentices are expected to have reached higher educational levels including the completion of pre-vocational and vocational studies and apprentices are more productive because of these higher educational levels. For example, the evidence of Mr Michael Hall, for the MBA, was to the effect that it is fair to recognise life experience and skills brought from other industries. The evidence of Douglas Greening was also that, as part of competency based training and assessment, an apprentice was required to address a much higher level of communication, self management and health and safety mastery and as part of every practical assessment, the apprentice must deliver a Safe Work Method Statement as a result of Job Safety Analysis. Mr Greening deposed that this activity, of itself, uses higher order skills not previously required of apprentices during training and examination. We accept that evidence. (e) the current rates for apprentices/trainees in NSW are generally and significantly lower than those that apply across the building and construction industry across Australia. We observe that this factor does not, of itself, necessarily warrant a salary increase, however, it does indicate special factors in the rates in NSW that are anomalous. Present application 14 The amended application seeks, in essence, to delete the current wage rates in the Award for apprentices and replace them with new increased rates of pay. The key changes in this regard are: (a) the rate is now described in relation to all apprentices and trainees as a percentage of the trade rate or the "CW3 rate", which makes the Award consistent with the federal award; and (b) the actual quantum of the rates in the amended application reflects a settlement between all of the parties and the applicant, other than the HIA; and (c) the introduction of the increases is staggered commencing from 1 February 2007. 15 The HIA made a number of submissions of significant character in opposition to this application. Consistent with the principles already set out, ordinarily these are matters which would be significant, however, we consider that there is one very important difference in this case. 16 While the earlier proceedings followed a robust adversarial course, the amended application proceeded in a very different manner. Notwithstanding the HIA's partial reliance on earlier evidence and despite being given the opportunity to present fresh evidence in response to the amended application, the HIA did not present any fresh evidence in support of its opposition to the variation sought. As a consequence, many of the objections raised by the HIA were without evidentiary foundation and directly inconsistent with the evidence led by the other parties. 17 The CFMEU also contended that HIA was in an analogous position to that of the Employers Federation in Re Transport Industry who opposed the negotiated settlement but brought no direct evidence from an employer that opposed the arrangement - described in Re Transport Industry in the following terms: … one of principle and not of direct representation of any members … at the end of the proceedings there was no identifiable employer of transport workers opposed to the Award being made. 18 The HIA did not present evidence, despite being given the opportunity to do so, from their membership. Indeed, no evidence was called as to whether their membership was even concerned about the application. The HIA referred to a Group Training Company as being affected by the Award. However, as Mr A Britt of counsel, who appeared for the MBA, contended, the Group Training Company was itself incorporated and, as submitted by the HIA, would not be covered by the Award in light of the changes to the Workplace Relations Act (1996) (Cth). Mr Britt also contended that there was evidence that the Group Training Company, in any event, employs apprentices by way of Australian Workplace Agreements and, as such, is exempt from the coverage of the Award. 19 Mr Simpson submitted that the Commission should take judicial notice of the fact that some of HIA's members would be affected by the variation to the Award. As we have already stated, we have accepted that HIA is a minor interest in these proceedings. However, on the principles in Re Transport Industry, this required the dissenting party to demonstrate why the agreement, in substance and as a matter of merit, should not be approved. HIA has not only failed to do this but has actually not demonstrated that there is any opposition amongst its membership or at least that there is any proper foundation to the issues it raised. 20 On this basis, we turn our attention to a consideration of the merits of the amended application and will, in turn, consider the submissions made by the HIA in opposition to that application. Consistent with the approach taken in Re Transport Industry, the degree to which HIA's objections impact on our decision will depend on the circumstances. Consideration 21 On balance, we consider that this is a case where the application, which was essentially made on a joint basis, should be approved. Our reasons for this conclusion are as follows: (a) the largest group of employer representative bodies in the industry, the MBA, together with other representative groups comprising BISCO, ABI and Employers First, have consented to (or not opposed) the variation sought and, indeed, the MBA has strongly contended for the variation to be made; (b) we are satisfied that the consenting parties have established a substantial basis in merit to justify the increases in rates of pay. In particular, we consider that the evidence as to the work-value changes arising from competency based training and the changing demographics of apprentices provides compelling evidence of the need to endorse the increases in rates of pay agreed by all but one of the parties to these proceedings; (c) we do not accept that HIA's objections provide a sufficient basis for refusing the variation sought in the amended application. In this regard, we observe: (i) the HIA contended that employers currently have no difficulty in finding applicants for apprenticeships and there is no justification for increasing apprentice wages in order to address skills shortages. However, this contention does not address the CFMEU's submission that the critical issue relating to skills shortage is the very low retention rates. In this regard, the HIA's own evidence pointed to a high termination rate of almost 40 per cent in a single year (although an unspecified number of these may have continued their apprenticeship with another employer). The evidence of the MBA suggested a drop out rate of approximately 50 per cent. (ii) the HIA expressed concern about the financial viability of its members in the event of the wage increases - however, the HIA did not lead any evidence to sustain this concern nor did it counter the contention of the CFMEU and the MBA that the HIA survey showed that some HIA members paid over award wages. The HIA has not been able to demonstrate with any clarity just what will be the real impact of the variation to the Award upon its members, beyond the mere assertion that higher wages may increase costs. This is an important consideration as there is sufficient contradictory evidence in the case to raise doubts as to the significance of any financial impact on HIA members. For example, many of those members are already paying over-award wages. We also agree with the MBA's contentions that if any HIA members had any concerns about their ongoing financial viability, the wage fixing principles themselves make provision for such concerns to be dealt with by way of an Economic Incapacity Principle. We have not been asked to consider any such applications; (iii) the HIA contended that its very numerous builder members in NSW would be directly and adversely affected by the increase in wage rates, yet no member was called to give evidence either in relation to the initial proceedings or in relation to opposition to the comprehensive conciliated settlement. Whilst the absence of such evidence may have been explained in the context of the initial proceedings as HIA was not the lone objector (in those proceedings), the evidence is glaringly absent in the context of the comprehensive conciliated settlement, particularly where the HIA was given an opportunity to present such evidence and to delay the hearing of this matter to allow such evidence to be adduced. We are satisfied that we can disregard the potential detriment effect on HIA members in such circumstances. 22 We note finally that the HIA contended that it supported national consistency of apprentice wages and, in this regard, the Commission should have regard to a decision of the Australian Fair Pay Commission ("AFPC") made on 26 October 2006. The HIA contended that the Commission should have regard to the increases awarded by the AFPC in considering whether the rates in the comprehensive conciliated settlement were fair and reasonable. 23 We consider that this decision is wholly irrelevant for the present purposes for the following reasons: (a) the AFPC is not a tribunal that acts judicially or even quasi-judicially and, on that basis, its considerations are not applicable to decisions of this Commission; (b) the wage setting parameters upon which the AFPC operates are quite distinct from the wage fixing principles on which the Commission proceeds: see State Wage Case (No 6) (2006) 153 IR 268 (at [10] to [11]); (c) as conceded by the HIA in its submissions, the AFPC did not give any special consideration to the rates of pay for apprentices or trainees. Orders 24 We make the following orders: 1 Pursuant to s 17 of the Industrial Relations Act 1996, the Commission varies the Building and Construction Industry (State) Award in the terms stated in schedule A of the amended application filed by the Construction, Forestry, Mining and Energy Union (NSW Branch). 2 The variation shall operate on and from 8 December 2006. ____________ 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.