STATE WAGE ORDER PURSUANT TO SECTION 50A(1)(A) OF THE ACT

(FOR ADULT APPRENTICE MINIMUM WAGE ONLY)

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES (Commission's own motion)

APPLICANT

-v-

Trades and Labor Council of Western Australia, Minister for Consumer and Employment Protection, Australian Mines &  Metals Association Inc and Chamber of Commerce & Industry of Western Australia

RESPONDENT

CORAM Chief Commissioner A R Beech

 Senior Commissioner J F Gregor

 Commissioner S.J. Kenner

HEARD Thursday, 5 October 2006

DELIVERED tUESDAY, 17 October 2006

FILE NO. APPLB 66 OF 2006

CITATION NO. 2006 WAIRC 05589

CatchWords State Wage Order – Commission’s own motion – Minimum weekly rate of pay for adult apprentices under Minimum Conditions of Employment Act 1993 – Industrial Relations Act 1979 s.50A, s.50B(2); Labour Relations Legislation Amendment Act 2006 s.22(3),(4) and (5)

Result State Wage Order issued

Representation Ms C Ozich on behalf of Trades and Labor Council of Western Australia

 Ms J Gardner and with her Mr M Hammond on behalf of the Minister for Employment Protection

Mr M Borlase on behalf of Australian Mines and Metals Association Inc

Mr D Jones on behalf of Chamber of Commerce and Industry of Western Australia

Reasons for Decision

1         This application is part B of application 66 of 2006 created on the Commission’s Own Motion pursuant to section 50A of the Industrial Relations Act, 1979 ("the Act").  It concerns only the setting of a minimum weekly rate of pay for apprentices who have reached 21 years of age ("adult apprentices").  By section 50A(1)(a)(ii) of the Act the Commission is to set the minimum weekly rate or rates of pay applicable under section 14 of the Minimum Conditions of Employment Act, 1993 ("MCE Act").  By section 50B(2) of the Act the Commission may set a minimum weekly rate of pay in relation to adult apprentices that is different from a rate or rates for apprentices who are under 21 years of age.

2         By sections 51BA and 51BB of the Act, the Commission is obliged to give the Minister for Employment Protection ("the Hon Minister"), Chamber of Commerce and Industry of Western Australia (Inc) ("CCIWA"), Australian Mines and Metals Association (Inc) ("AMMA") and the Trades and Labor Council of Western Australia ("TLCWA") an opportunity to be heard.  On 5 October 2006 they each informed the Commission that they had reached an agreed position.  The agreed position is that the minimum weekly rate of pay for adult apprentices should be set at the third-year rate for a four-year apprenticeship under the Metal Trades (General) Award 1966 which is $448.65 per week.

Background

3         Sections 50A and 50B were inserted into the Act by the Labour Relations Legislation Amendment Act, 2006 and took effect on 4 July 2006.  This is the first occasion the Commission has considered whether a minimum weekly rate of pay should be set for adult apprentices for the purpose of section 14 of the MCE Act.  Prior to sections 50A and 50B, the power of the Commission to set a minimum weekly rate of pay for adult apprentices who are award-free was constrained by the previous section 51G(3) of the Act.  As a consequence, there is not a minimum wage for adult apprentices who are award-free. 

4         There is, however, a minimum weekly rate of pay for adult apprentices whose employment is covered by an award.  From 7 July 2006 that minimum weekly rate of pay has been $421.70 (see (2006) 86 WAIG 1654 at 1656).  It may well be that the employers of adult apprentices who are award-free, and for whom there is no minimum weekly rate of pay, use the rate of $421.70 as a yardstick for the wages they pay to their adult apprentices.  Nevertheless, in the absence of a minimum weekly rate of pay for adult apprentices under section 14 of the MCE Act having been set by the Commission, it is possible that a first-year or second-year adult apprentice who is award-free is being paid the current rates for first-year and second-year apprentices who are award-free which are $251.54 and $329.07 respectively ((2006) 86 WAIG 2683 at 2687).  If the Commission simply awarded the rate agreed by the Hon Minister, CCIWA, AMMA and TLCWA, $448.65, it would award a very significant increase in wages.

The Issues

5         Setting a minimum weekly rate of pay for adult apprentices is not a straightforward task.  It presented considerable difficulty when in June 2003, following amendments to the Act in 2002, the Commission issued a General Order which, as well as giving effect to the National Wage Case decision of that year, amended all awards to provide for a minimum weekly rate of pay for adult apprentices of $406.70 per week ((2003) 83 WAIG 1899 at 1907). 

6         Setting that rate caused the CCIWA to apply to vary the General Order to provide for the rate to be phased in over a twelve month period.  The Commission in that matter noted ((2002) 83 WAIG 3537 at [41]) that it arose from a misunderstanding about what had been understood to have been an agreement between the Hon Minister, CCIWA, AMMA and the TLCWA that the minimum weekly rate of pay for award-free apprentices would be the third-year of a four-year apprenticeship, that is 75% of the tradesman’s rate, under the Metal Trades (General) Award 1966.  The Commission decided that there needed to be a cautious approach and ordered that the $406.70 be phased in in three-monthly increments (ibid at 3556).  The rate of $406.70 which came into effect on 30 April 2004 was subsequently increased to $421.70, a $15.00 increase, from 7 July 2006.

Adult Apprentices who are Award-Free

7         Section 14 of the MCE Act sets the minimum weekly rate of pay for apprentices.  The rate applies to apprentices who are award free (and by the operation of section 5 of the MCE Act to apprentices who are covered by an award if the award rate of pay is less than the MCE Act rate of pay).  This brings us then to the present position.  We accept the central premise of the Hon Minister that there is a need to encourage skills development in Western Australian industry including by the uptake of apprenticeships by adults.  With the school leaving age in this State being gradually increased to 17, and with more students completing secondary education than in previous generations, there is an increasing number of apprentices aged 21 years or over.  Minimum wage levels are an important factor in determining the attractiveness of apprenticeships. 

8         On the one hand, there is a need for adult apprentices to receive an appropriate wage that enables them to meet greater living expenses and responsibilities which they have compared with junior employees; on the other hand, there is a need to ensure that adult apprentices do not become unattractive to employers if the wage paid to them in their first or second year is seen as less than the value of employing an apprentice.  The Commission is nevertheless urged by the Hon Minister to include in its considerations not just the cost of employing adult apprentices but also the potential longer term cost to the State and industry as a whole if there is not an adequate supply of appropriately skilled labour in future years.  The Commission is assisted by the agreement of each of the Hon Minister, CCIWA, AMMA and the TLCWA that the minimum weekly rate of pay for adult apprentices who are award-free should be $448.65 per week. 

9         To further assist the Commission in its deliberations, the Commission directed the Registrar to write to 25 training organisations employing apprentices in Western Australia asking them to make a submission on the issue.  The Commission acknowledges that many of those training organisations may be constitutional corporations which, by virtue of the Work Choices amendments to the Workplace Relations Act, 1996 from 27 March 2006, may not be directly affected by any Order to issue from these proceedings.  The Commission received responses from only four, they being the Motor Trade Association of Western Australia (Inc), Master Builders Association of Western Australia, ChoiceOne Pty Ltd, and the Motor Industry Training Association of Western Australia (Inc) ("MITA").  We express our thanks to those four organisations for writing to us in the detail in which they did.

10      The Hon Minister also provided the Commission with figures assembled by the Department of Education and Training for the calendar years 2002-2005 showing the numbers of adult apprentices in training.  We conclude from the figures that the increase in the minimum weekly rate of pay for adult apprentices who are covered by awards which was phased in to 2004 had little measurable impact on the numbers of adult apprentices; similarly, it had little effect on the number of adults commencing apprenticeships. 

11      We agree with the conclusion of the Hon Minister that any order to issue from these proceedings setting a minimum weekly rate of pay for adult apprentices who are award-free is likely to affect mostly private sector employers who are not constitutional corporations and who employ adult apprentices who are in the first or second year of an apprenticeship.  Those employers are likely to be found in the following industries:

Automotive.  The figures show that the total number of adult apprentices and the number of adults commencing apprenticeships in this industry increased significantly between 2002 and 2005 notwithstanding the introduction of the minimum wage for adult apprentices who are covered by awards. 

 Building and Construction.  Between 2002 and 2005 the number of adult apprentices in building and construction (excluding electrical trades) and the number of adults commencing apprenticeships in building and construction rose significantly. 

 Electrical.  In the electrical industry, both the total number of adult apprentices and the number of adults commencing apprenticeships increased substantially between 2002 and 2005.

 Food.  The number of adult apprentices in the food industry rose between 2002 and 2005.  The number of adults commencing apprenticeships in the food industry remained relatively stable.

 Hospitality and Tourism.  Adult apprenticeships in the hospitality and tourism sector grew steadily between 2002 and 2005.  The number of adults commencing apprenticeships in this industry also increased.  Most State hospitality awards contain an adult apprentice wage equivalent to $431.40 per week.

 Light Manufacturing.  The number of adult apprentices working in, and commencing apprenticeships in, this sector rose between 2002 and 2005.

 Metals, Manufacturing and Services.  The number of adult apprentices working in this sector increased significantly between 2002 and 2005, as did the number of adults commencing apprenticeships in these industries.

 Wholesale, Retail and Personal Services.  Between 2002 and 2005 the total number of adult apprentices in this sector increased while the number of adults commencing apprenticeships in these industries remained relatively unchanged. 

12      It is this evidence which has been of persuasive value to the Commission in these proceedings.  The similarity between these proceedings relating to award-free adult apprentices and the 2003 circumstances relating to award-covered adult apprentices is not lost on the Commission.  However, the above evidence shows that the phasing in of an acceptable and fair minimum weekly rate of pay for adult apprentices covered by awards did not make adult apprenticeships unattractive nor uneconomic. 

13      We also think that the evidence provides an answer particularly to the Master Builders Association of Western Australia and the Motor Trade Association of Western Australia (Inc), both of which urged the Commission in their written submissions not to increase the minimum wage for award-free adult apprentices in the manner proposed to us.  We also acknowledge the comments of the MITA which, while recognising that future skills shortages will only be successfully addressed through increasing the participation of adults in apprenticeships, and that adult apprentices are an untapped resource in this respect, submitted that there are significant barriers to employing adult apprentices especially when that wage is compared by employers to a non-adult wage with similar level of experience or skills.  The MITA considers that unless there is some form of government subsidy available, the increases proposed to us would further reduce the opportunity of many adults to secure an apprenticeship. 

14      We have also noted the submissions of the CCIWA that a survey done of its members employing apprentices resulted in most of its members expressing support for the increase proposed.  This position is the position of ChoiceOne Pty Ltd which submitted that in line with the current skills shortage, it would be a benefit if the rate of pay was increased to encourage more adult apprentices to apply for the current positions that are available. 

15      The Minister’s evidence before us shows that there is only one apprenticeship which is said to be definitely award-free, that being Horticulture (Turf Management).  This refers to a specialised trade outside of nursery horticulture producing and managing turf and is not covered by the Horticultural (Nursery Industry) Award No. A30 of 1980 nor the Golf Link and Bowling Green Employees' Award 1993, both of which, of course, prescribe a minimum weekly rate of pay for adult apprentices covered by them of $421.70.  Horticulture (Turf Management) has 31 apprentices over the age of 21; it is not know how many of these are in their first or second year. 

16      A further four apprenticeships, they being Signwriting, Stone Masonry, Glazing/Bevelling and Lock Smithing are, in the view of the Hon Minister, uncertain regarding award coverage.  On the figures supplied by the Hon Minister, there are possibly 207 apprentices potentially award-free although the real figure is probably much lower as a significant number of these are likely to be on federal awards and agreements, or covered by State agreements.  It is not known how many of these are in their first or second year.

Decision

17      We conclude that the increase proposed to us will have little effect generally because the vast majority of adult apprentices are in apprenticeships covered by awards, their minimum weekly rate of pay being $421.70.  We also recognise that the operation of section 5 of the MCE Act necessarily means that the minimum weekly rate of wage for adult apprentices covered by awards of $421.70 will increase if an Order issues from these proceedings setting a minimum weekly rate of pay for adult apprentices which exceeds that sum.

18      We conclude from the previous decisions of the Commission and the submissions before us on this occasion that the third-year rate of a four-year apprenticeship, currently $448.65, is a minimum weekly rate of pay which is both fair to the adult apprentice and, on the data presented to us, not a disincentive to employers to employ adult apprentices.  We also see no reason why there should be any difference between the minimum weekly rate of pay for adult apprentices who are award-free and for adult apprentices who are covered by awards.

19      Taking into account that there were unforeseen consequences for award-covered adult apprentices when the Commission issued its General Order in June 2003 implementing the increase for award-covered adult apprentices in one step, we are naturally cautious on this occasion in prescribing in one step the third-year rate of a four-year apprenticeship as the minimum weekly rate of pay for adult apprentices for the purposes of section 14 of the MCE Act.  Following the example set by the Commission’s General Order in the CCIWA application in 2003 for apprentices covered by awards, we have decided the rate will be phased-in.

20      The phasing-in period used in 2003 spread the wage increase over a period of six months without any known negative consequences to award-covered adult apprentices or their employers.  From information available to us that was because many adult apprentices in their first or second year were already paid in excess of the minimum weekly rate for that level of apprentice.  We propose a similar phasing-in period on this occasion.

21      As an additional safeguard we will also make provision for the Commission to consider either exempting an individual employer from the effect of the General Order to issue, or varying its effect, upon an individual employer notifying the Commission in writing, whether by letter or by lodging a formal application in the Commission, of the grounds for doing so.

22      It is important to recognise that the minimum weekly rate of pay for adult apprentices we now prescribe will also increase the rate being paid to award-covered adult apprentices when the rate exceeds $421.70 per week.  This will occur on 1 July 2007 at which time by section 50A(5) another State Wage Order is required to come into effect.  As a consequence, the rate of $448.65 might be overtaken by, and be increased by, any increase in that future State Wage Order.

23      The Minute of a proposed General Order now issues.