RAILWAY EMPLOYEES' AWARD NO. 18 OF 1969
PUBLIC TRANSPORT AUTHORITY RAIL CAR DRIVERS (TRANSPERTH TRAIN OPERATIONS) AWARD 2006

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2015 WAIRC 00378

DELIVERED : FRIDAY, 15 MAY 2015

FILE NO. : APPL 24 OF 2014, APPL 66 OF 2012

Applicant

AND

Public Transport Authority of Western Australia

Respondent

Catchwords : Industrial law (WA) – Applications to vary awards – Variations sought to reflect the actual total percentage increases in adjustments to the State minimum wage – Compounding effect of flat dollar adjustments awarded in successive State Wage Cases – Wage relativity between award classifications and the State minimum wage – Principles applied – Compression of wage relativities – Objects of the Industrial Relations Act 1979 – Wage Fixing Principles – Public sector decision – Insufficient nexus between cumulative State minimum wage percentage increases and adjustment of award classification rates – Preservation of skill based career paths – Elevation of base rates of the awards for bargaining purposes – Applications dismissed – Order made

Legislation : Industrial Relations Act 1979 (WA) ss 6(ad), 6(ae), 26, 26(1), 26(1)(c), 26(1)(d), 26(2A), 26(2A)(a), 26(2A)(b), 26(2A)(b)(iii), 26(2A)(c), 26(2A)(c)(ii), 26(2B), 26(2B)(c), 26(2E), 40, 42G, 50A, 50A(1)(b), 50A(1)(c), 50A(2), 50A(3), 50A(3)(a)(ii), 50A(3)(a)(v), 50A(4), 50A(7)

Labour Relations Legislation Amendment Act 2006 (WA)

Public Sector Management Act 1994 (WA) s 3(1), Sch 2

Workforce Reform Act 2014 (WA)

Result : Applications dismissed

Representation:

Applicant : Mr K Singh

Respondent : Mr R Farrell of counsel and with him Ms T Kerr

Case(s) referred to in reasons:

Public Transport Authority of WA v The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch [2006] WAIRC 04051; (2006) 86 WAIG 807

State Wage Case (1981) 61 WAIG 1894

State Wage Case (1992) 72 WAIG 191

State Wage Case [2011] WAIRC 00399; (2011) 91 WAIG 1008

State Wage Case [2012] WAIRC 00346; (2012) 92 WAIG 557

State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641

The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority [2006] WAIRC 03494; (2006) 86 WAIG 291

The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority [2006] WAIRC 03895; (2006) 86 WAIG 457

The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority [2011] WAIRC 00157; (2011) 91 WAIG 694

The Minister for Health in his Incorporated Capacity under s.7 of the Hospitals and Health Services Act 1927 (WA) as the hospitals formerly comprised in the Metropolitan Health Service Board v Health Services Union of Western Australia (Union of Workers) [2015] WAIRC 00332

Trades and Labor Council of Western Australia v Minister for Consumer and Employment Protection, Chamber of Commerce and Industry of Western Australia [2006] WAIRC 04608; (2006) 86 WAIG 1633

Reasons for Decision

1         The present matter before the Commission involves applications brought under s 40 of the Industrial Relations Act 1979 to vary the Public Transport Authority Railway Employees’ Award No 18 of 1969 and the Public Transport Authority Rail Car Drivers (Transperth Train Operations) Award 2006. The applications are made pursuant to Principle 10 of the Wage Fixing Principles.

2         The variations are sought to reflect the actual total percentage increases that were awarded to the State minimum wage since 2006, and the applications are made on the grounds that the flat dollar adjustments since 2006, have compressed relativities in the two awards. The Union seeks to restore wage relativity between classifications in the awards and restore wage relativity of both awards to the SMW. The Union contended that the effect of the compression of wage relativities in both awards has led to unfair wage structures and devalued employees’ skills.

3         The Public Transport Authority opposes the Union’s applications to vary the awards. The Authority points to s 50A(7) of the Act which provides that a State Wage order shall not be added to or varied, and contended that the Union is effectively seeking to vary the Commission’s State Wage orders to apply a percentage outcome, in substitution of the flat dollar amount determined by the Commission.

4         The Authority contended that the Union’s claim has failed to consider the wages paid to railcar drivers under the various industrial agreements and orders since 2006. It said the awards have already been modernised once and the present applications make no work value claims. From the Authority’s point of view, the Union’s applications seek to increase the wage rates so that the awards will become a competitive base from which to bargain.  It said the outcome the Union is seeking would be contrary to s 26 and the objects of the Act.

5         As referred to below, it was common ground that in making a public sector decision, the Commission must take into consideration certain matters in accordance with ss 26 and 26(2A) of the Act. The Authority contended that the variation to the awards would have flow on effects across the State government and the private sector, and would have the effect of undermining the considerations the Commission had regard to in the State Wage Cases since 2006.

The parties’ contentions

6         The Union submitted that wages in the awards have compressed over time due to flat dollar amounts being awarded in the State Wage Cases. The Union contended that the compounding effect of awarding a flat dollar amount since 2006, with the exception of 2012, has rendered the base rates of pay in the awards “obsolete”, and has had the effect of making the awards effectively useless to railcar drivers.

7         The Union pointed out that in the State Wage Case [2012] WAIRC 00346; (2012) 92 WAIG 557 at par 112 the Commission in Court Session recognised the effect of compressing relativities between wage rates in awards, which was caused by awarding a flat dollar amount, and the Commission considered the importance of keeping awards modernised. The effect of compression of relativities in awards was also foreshadowed in other State Wage Cases such as the State Wage Case (2006) 86 WAIG 1633 at par 97 where the Commission stated that if the compression in relativities in particular awards are a cause for concern, the effects could be addressed by an individual award variation application pursuant to s 40 of the Act.

8         The parties made submissions and prepared statistical information to support their contentions which was tendered into evidence, which I turn to as follows.

Erosion of skill based career paths

9         Firstly, the Union submitted that the compression of relativities has led to an erosion of skill based career paths which has created a disincentive on employees to train and be trained, which has reduced the benefit of acquiring skills. The Union said that the flat dollar increases from 2006 to 2014 to the awards had led to the erosion of wage relativities among the classifications in each award.

10      For example, in respect of the RCD Award, the Union said the table below shows that the wage relativity between driver trainers and railcar drivers has eroded by 0.87%. Likewise, the wage relativity between driver coordinators and railcar drivers has eroded by 1.73%.

11      In respect of the RE Award the below table prepared by the Union shows that the relativities between the base rates for levels 5, 6, 8, 9 and 10 have been eroded in relation to the level 4 base rate. The table shows that the relativities between the base rate for level 1, 2, 3, 3A and 7 increased as compared to the level 4 base rate. The Union pointed out that, except for level 7, the table shows that higher skilled workers, which are level 5 and higher, experienced a net loss of relativity to the level 4 base rate while lower skilled workers, which are level 1 to level 3A, experienced a net gain in relativity to the level 4 base rate.

12      What this data means, according to the Union, is that the value of higher skilled workers’ skills has been lost over time.

13      Tendered as exhibit A2 was a table prepared by the Union showing that the flat dollar amounts created a compressing effect within the relative classifications of the awards. For example, in respect of driver coordinators under the RCD Award, the table shows that in 2006, the role had a base rate of 111.91% of the drivers’ rate, and in 2014 it was 110.18% of the drivers’ rate, which was a difference of -1.73%, which has not maintained relativity.

14      In response to this evidence, the Authority submitted that there is no practical effect in the workplace because the relevant employees are covered by agreements which maintain relativities.

Erosion of award rates to the State minimum wage

15      Secondly, the Union submitted that flat dollar increases to the awards from 2006 to 2014 has led to the erosion of relativities between the classifications in each award and the SMW.

16      According to the Union, this erosion has meant that skilled workers’ rates under the RCD Award and the RE Award have fallen closer to the SMW, which, in turn, devalues their skills and training. Exhibit A2 included tables showing the compressions of relative award classifications.

17      In respect of the RCD Award, the Union outlined that the loss of relativity between the base rates and the SMW was as follows:

a)       Trainee railcar drivers’ base rate got closer to the SMW by 8.27%;

b)       Railcar drivers’ base rate got closer to the SMW by 7.03%;

c)       Driver trainers’ base rate got closer to the SMW by 7.09%; and

d)       Driver coordinators’ base rate got closer to the SMW by 7.11%.

18      Similarly, in respect of the RE Award, the Union said the loss was as follows:

a)       Level 1 base rate got closer to the SMW by 2.94%;

b)       Level 2 base rate got closer to the SMW by 3.80%;

c)       Level 3 base rate got closer to the SMW by 4.43%;

d)       Level 3A base rate got closer to the SMW by 4.83%;

e)       Level 4 base rate got closer to the SMW by 5.16%;

f)        Level 5 base rate got closer to the SMW by 5.60%;

g)       Level 6 base rate got closer to the SMW by 5.89%;

h)       Level 7 base rate got closer to the SMW by 4.13%;

i)         Level 8 base rate got closer to the SMW by 6.63%;

j)         Level 9 base rate got closer to the SMW by 6.78%; and

k)       Level 10 base rate got closer to the SMW by 6.89%.

19      Tendered as exhibit A1 was another table prepared by the Union showing the compounding effect of the flat dollar rate awarded by the State Wage orders to adjust the RCD Award. The table states that from 2006 to 2014 the SMW grew by 37.58%, and over the same period, the RCD Award grew by 20.95%. The table also included calculations of the rates under the RCD Award, if the rates grew by the same percentage as the SMW. The Union pointed out that, according to the table, over the period 2006 to 2014, the actual percentage increases to the RCD Award was less than the Perth Consumer Price Index and the percentage increase to the SMW.

20      The Authority said there is an insufficient justification for the nexus the Union says exists between the SMW percentage adjustments and the base rates of classifications other than the minimum wage in these awards.

Avenue, modernisation and utility

21      The Authority contended that instead of the current applications to vary the awards under s 40 and Principle 10, the more appropriate course would be for the Union to seek to be heard in the next s 50A, State Wage Case. Under s 50A(2), the Commission may adjust individual rates of wages in relation to specified awards, but since 2006 neither party has submitted that award rates should be varied by a percentage, rather than by flat rate increases.

22      The Authority submitted that the Commission, in setting the SMW is required to balance a number of competing considerations in ss 50A(3) and (4), which includes the need to meet the needs of the low paid and the capacity of employers to bear the costs of increased wages, salaries, allowances and other remuneration. The Authority pointed out that under s 26(2E), the factors in ss 26(1)(d) and 26(2A) do not apply when the Commission is exercising its jurisdiction under s 50A. The Authority said that while an application may be made to vary an award under s 40 and Principle 10, such an application is only appropriate if there is some special merit or circumstances of the employees covered by the awards.  It said such circumstances do not exist here.

23      Section 50A(3)(a)(v) provides that the Commission must also take into consideration the need to protect employees who may be unable to reach an industrial agreement. The Authority asserted that the Commission’s rationale for awarding a flat dollar increase in the State Wage orders was to favour low wage earners and to apply the largest proportional increase to those who are the target of the SMW; whereas a percentage increase flows through to higher levels and increases labour costs. It said it was the Commission’s intention that flat increases achieve the best outcome for those employees who benefit most from the State Wage order.

24      Further, the Authority contended that the Commission made uniform flat dollar adjustments to all award rates, because it provided a larger increase to employees on lower award rates. If the Commission recognised a nexus between the percentage by which the SMW was increased and other award rates of pay then this would impact on the overall cost of the resulting award wage increases.  This would constrain the Commission’s capacity to meet the needs of the low paid.

25      The Authority characterised the Union’s applications as seeking to undermine the series of State Wage Cases since 2006, by seeking a variation to the awards in an unconventional manner which, in effect, is seeking to re-litigate the outcomes of the s 50A process. The Authority said this was not a case where the employees covered by the awards cannot bargain and rely on the awards as a safety net. Rather, the wages and conditions of employees covered by the awards are already fixed by industrial agreements. It was the Authority’s submission that the wages under the industrial agreements significantly exceed real wage maintenance and have maintained relativities. The Authority submitted that the importance of industrial agreements is reflected in the objects of the Act. Section 6(ad) promotes collective bargaining over individual agreements. Section 6(ae) places importance on ensuring all registered agreements provide for fair terms and conditions of employment.

26      The Authority said that consideration should be given to the fact that both awards have been modernised once, where the agreement rates were adopted by the awards. For example, the RE Award wage rates were set in the most recent 2014 State Wage Case, and since the modernisation of the RE Award in March 2006 the wage rates for employees up to level 7, have increased in real terms, which was identified in the award weekly wage rates tendered as exhibit R1.

27      Further, the Authority said the RCD Award wage rates set in the March 2006 modernisation process incorporated the agreement rates of pay, without adjustment for productivity elements underlying those agreement rates. This meant the subsequent adjustments made by the State Wage Cases, operated from a higher base than what would otherwise have applied. The Authority drew the Commission’s attention to pars 371 to 373 of the decision of the Commission as presently constituted in The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority [2011] WAIRC 00157; (2011) 91 WAIG 694, where I recognised that the real wages for railcar drivers had increased by a small margin since 2006 and it was not open to conclude that the award rates had not generally kept pace with inflation.

28      The Authority questioned the relevance of the compression effect to these applications.  It submitted that the effect of flat safety net wage adjustments on the relativities within the awards is slight, and does not meet the threshold to require adjustments above the safety net. It said the Union has not pointed to a specific detriment suffered at the workplace level resulting from the change.

29      From the Authority’s perspective, if the Commission considers that relativities should be restored, then that should be achieved by adjusting the other rates by reference to the current rate, as outlined in exhibit R1. That is, the rates should be restored to their relativity in the awards as at 2006.  It should not be achieved by increasing every rate by the percentage of the increase to the SMW rate since 2006.

30      The Authority pointed out that while increases beyond the safety net adjustments provided annually through the State Wage Case could be available under the Wage Fixing Principles, they would usually require justification based on increases to work value, for example. The Authority said that, here, there is no such work value claim, and the current applications relate to awards that have already been modernised once.

Indirect effect

31      The Union’s Secretary, Mr Robinson, gave evidence in the proceedings that the awards continue to have relevance in the workplace. For instance, if during negotiations for an agreement, railcar drivers seek to return to the award and the base rates have been compressed since 2006, then it would be unlikely or almost impossible for the drivers to return to the award, because the value of the current award would create a disincentive. As to the RE Award, according to the Secretary, the employees’ return to the award is “basically ruled out because of the compression values”, which has made the award redundant.

32      In early 2008 to late 2010 the rail car drivers returned to the RCD Award, because of the differences under the proposed agreement compared with the award. The Secretary said there was a difference of a few dollars, but the incentive to return was to obtain conditions that were not offered in the proposed agreement. The Secretary stated that the rail car drivers’ return to the award in 2008 was “unusual” because usually agreements are superior to awards, but returning to an award would not be unheard of if bargaining started to fail.  In that particular circumstance in 2008, the RCD Award rates had already been modernised relatively recently so as to incorporate the enterprise agreement rates.

33      The Secretary said that keeping the awards “relevant” means, when bargaining with an employer and the value of the award rates are less due to State Wage orders, this creates a disincentive to compare the award to the proposed agreement when negotiating for higher pay. According to the Secretary, hypothetically, if the next round of bargaining and negotiations continue over a lengthy period with no opportunity for retrospective payments, and the awards were not so far behind the proposed agreements, then the awards could become competitive.

34      The Secretary said if the awards were varied there would be better bargaining outcomes, as the awards would put pressure on the parties to come to an agreement quicker. The varied awards would be leverage if bargaining became protracted. From the Union’s point of view, the awards create a safety net and the present applications do not place unnecessary pressure on the employer, rather, pressure would be placed on the Union to try and reach a deal.

35      The Secretary’s evidence was that all employees that are covered by the awards are covered by agreements which are superior, and those employees would be in the same position even if the variations were made.  Hence there is no cost to the Authority. The Secretary confirmed that any increases to the rates in the awards would have no monetary effect on the Authority, because most employees are covered by agreements anyway, which pay above the awards. The Secretary’s evidence was that these applications are about maintaining relativity of the awards and keeping them relevant, so that they can be returned to for whatever reason.

36      Mr Debenham, until recently the Railcar Driver Sub-Branch Secretary, also gave evidence in the proceedings.  He agreed that if the award rates were increased by the percentage claimed by the Union, then the award would become competitive.  Mr Debenham’s evidence was that a more competitive and relevant award, as a safety net, would allow the Union to be in a position to drive a bargain.  If the gap between a proposed agreement and the award is too large, then there would be no opportunity to have a relevant award to fall back on if negotiations became protracted. Likewise, Mr Debenham said that if the awards’ safety nets were relative then it would be less likely the Authority would push for tough work conditions from its employees.

37      In respect of the return to the RCD Award in 2008, the Authority submitted that was an unusual situation whereby the award became competitive with the agreement offered because the award had already been modernised. The relatively recent award modernisation discussed earlier in these reasons meant that the award rate had a significantly higher base rate to start with.

38      The Authority said that the awards already provide a reasonable base for bargaining, and these applications seek to increase the rates with no changes to conditions. Conversely, the wages and conditions bargained for in the relevant agreements reflect compensation for productivity and other efficiencies which is consistent with the objects of the Act and s 26, and such efficiencies are not reflected in the awards.

39      After the conclusion of the hearing the Commission invited further submissions from the parties in relation to the significance of the terms of Part 4 of the RE Award, which prescribes relativities, based on metal trades classifications.  Also, submissions were invited in relation to the relativities established for railcar driver classifications in the Commission’s enterprise order proceedings. The parties filed further written submissions.  They were as follows.

40      As to the application of Part 4 of the RE Award, the Union submitted that it does not seek to rely on the relativities set out in the RE Award.  Rather, it contends that it is seeking to restore the relativities as at 2006.  In relation to the enterprise order relativities, the Union submitted that as it considered that the findings of the Commission in that matter were based on work value, then any application of similar principles should be the subject of a separate application.

41      For the Authority, it was submitted that the “notional” relativities set out in Part 4 are only indicative and not prescriptive. Further, reference was made to the actual agreed rates of pay inserted into the RE Award in March 2006, which were submitted to be different to the prescribed relativities, and which have been adjusted by SMW decisions since 2006.  As to the larger issue of the restoration of relativities generally, the Authority retreated from submissions made in the hearing, as set out at par 29 above. The Authority contended in its further submissions that as the restoration of relativities to those specified in the RE Award as at 2006 may lead to a lowering of some classification rates, as set out in exhibit R1, then that course should only be adopted by the Commission if the Union unequivocally prefers that course, rather than the status quo ante.  

42      As to the enterprise order proceedings for rail car drivers, the Authority submitted that the enterprise order proceedings were based on a work value assessment and it would be preferable for a further assessment of work value, if consideration is to be given to the terms of the former enterprise order relativities. Further, the Authority said that the 117% relativity for driver coordinators has been retained.

Public sector decision

43      The hearing on 27 January 2015 was adjourned on the basis that the Commission sought further submissions from the parties as to whether the matter involved a “public sector decision” in accordance with s 26(2A) of the Act. The Act was amended to insert s 26(2A) by the Workforce Reform Act 2014, which came into operation on 1 July 2014.  Section 26(2A) requires the Commission to take into consideration certain matters when making a public sector decision. I set out s 26(2A) and parts of s 26(2B) as follows:

26. Commission to act according to equity and good conscience

 . . .

(2A) In making a public sector decision the Commission must take into consideration the following —

(a) any Public Sector Wages Policy Statement that is applicable in relation to negotiations with the public sector entity;

(b) the financial position and fiscal strategy of the State as set out in the following —

(i) the most recent Government Financial Strategy Statement released under the Government Financial Responsibility Act 2000 section 11(1) and made publicly available under section 9 of that Act;

(ii) the Government Financial Projections Statement;

(iii) any submissions made to the Commission on behalf of the public sector entity or the State government;

(c) the financial position of the public sector entity as set out in the following —

(i) the part of the most recent budget papers tabled in the Legislative Assembly that deals with the public sector entity under the title “Agency Information in Support of the Estimates” or, if the regulations prescribe another part of those budget papers, that other part;

(ii) any submissions made to the Commission on behalf of the public sector entity or the State government.

(2B) In subsection (2A) —

…

public sector decision means any of the following —

…

(c) if the matters set out in subsection (2A)(a), (b) and (c) are relevant to the decision, any other decision that will extend to and bind a public sector entity or its employing authority (as defined in the Public Sector Management Act 1994 section 5);

…

44      The Commission raised with the parties an issue as to whether the provision was enlivened because, by way of s 26(2B)(c), a “public sector decision” arises if the matters set out in subsection (2A)(a), (b) and (c) are relevant to the decision, and any other decision that will extend to and bind a public sector entity will be such a decision. The parties submitted that the considerations in s 26(2A) applied to the present proceedings.

45      The submissions were that given the applications are brought under s 40 the Commission must take the factors in s 26(1) and 26(2A) into consideration, as the applications involve a decision which would bind the Authority, as a public sector entity. The Authority is a public sector entity as defined in s 26(2B). This is because s 26(2B) provides that a “public sector entity” is a public sector body as defined by s 3(1) of the Public Sector Management Act 1994.  A “public sector body” in s 3(1) of the PSM Act includes an agency, and an “agency” is also defined in s 3(1) to include an “SES organisation” which is body established or continued for a public purpose under a written law, and is specified in Schedule 2 to include the Authority. As such, the Authority, submitted that the Commission must take into consideration the matters outlined in s 26(2A).

46      The Commission sought to hear from the parties as to whether there was a potential financial impost on the Authority and the State.

47      As to the fiscal position of the State, the Authority submitted that from the Economic and Fiscal Outlook the overall budget position is poor, relative to previous periods. With the loss of the State’s AAA credit rating, along with rapidly declining GST revenue, the ability for the State Government to restore is budget position is constrained. Thus, cost pressure control is important, in particular labour costs.  As to the Authority’s  financial position it was submitted that  from the 2014-2015 Budget Paper, it is apparent that the Authority’s labour costs have increased and any further potential for labour cost increases should be avoided.

48      The Union did not dispute the content of the budget papers, and accepted the background facts as to the present state of the Western Australian economy. The Union submitted that the present applications will not further increase labour costs. Overall, the Union’s submission was that the Commission should place little weight on the matters set out in s 26(2A) given there would be no actual extra labour costs involved if the present applications were granted. The Union submitted that the Commission ought to consider the actual economic impact of the applications to vary, rather than the potential impact on bargaining.

49      In respect of the indirect costs associated with bargaining, the Union said that it was difficult to tell whether the Awards, being a safety net, would be the platform for bargaining in practice, and no employees are currently covered by the awards. It was the Union’s view that given the State’s Wages Policy and given it is likely that wages will be adjusted from current agreement rates, it is unlikely that the award rates would have a role to play in setting wage rates. The Union’s position was that future bargaining would not be impacted by the applications, unless the relevant employees hypothetically decided to return to the awards, which would provide lower wages in comparison to what they currently enjoy under the respective agreements.

50      The Union submitted that, in the context of bargaining, if the awards were varied, the effect would be to restore bargaining power to employees that had been lost over time simply because of the wage-setting structure.  The Union said that there would be no costs involved if the applications were granted, because the Authority would not be suffering any detriment, because it never should have benefitted from the effects in the first place.

51      The Authority submitted that award rates provide the context for bargaining, and if those rates were increased so that the awards become a viable alternative to bargained outcomes then it will likely result in the Union achieving higher wages or fewer productivity increases from the bargaining process. This, the Authority said, would have an indirect impact on the Authority’s budget. The Authority said the indirect effect would exist, even though the granting of the applications would not have an immediate direct cost impact on the Authority because the award rates would remain less than the agreement rates. As an example, exhibit R2 prepared by the Authority set out a table comparing the base rates under the awards and the relevant agreements.

52      The Authority said, if the Commission varies the awards and adjusts the rates to compensate the railcar drivers for receiving flat dollar increases, it will have potential flow on cost implications for employers, contrary to s 26(1)(d). The Union contended that the current applications are isolated to the RE and RCD Awards, and other applications brought by other Unions in respect of different awards will not necessarily be successfully varied under s 40.

53      I note that in respect of ss 26(2A)(b)(iii) and 26(2A)(c)(ii) no additional submissions were made on behalf of the Authority or the State government.

Consideration

Section 26(2A) consideration

54      For the purposes of the meaning of a “public sector decision” in s 26(2B) of the Act, I am prepared to accept, without finally deciding the matter on this occasion, that the matters referred to in s 26(2A)(a), (b) and (c) should be taken into consideration by the Commission. I do not however, without the benefit of further argument on the point, express any concluded view as to whether an indirect effect, such as that accepted by the parties in this case to potentially arise, is sufficient to enliven the requirements of s 26(2A) of the Act. 

55      Assuming, however, for present purposes that s 26(2A) has application its terms were very recently considered by the Commission in Court Session in The Minister for Health in his Incorporated Capacity under s.7 of the Hospitals and Health Services Act 1927 (WA) as the hospitals formerly comprised in the Metropolitan Health Service Board v Health Services Union of Western Australia (Union of Workers) [2015] WAIRC 00332.  In that case, involving the arbitration of disputed wage increases under s 42G of the Act, the Commission in Court Session considered the approach to the application of s 26(2A) and said at pars 118‑123 as follows:

118 This is the first occasion on which the Commission has been required to consider s 26(2A).

119 The Minister says the question for determination by the Commission is whether there are any other factors present which are so overwhelming as to make the salary increases offered by the Minister unfair in such a way that the Commission, despite the matters referred to in s 26(2A) and (2B), feels compelled to award a higher increase.  However, formulating the question in this way suggests that the matters referred to in s 26(2A) and (2B) are a standard against which other factors are to be judged and we do not agree that is an appropriate description of the Commission’s task.

120 The HSU says the task of the Commission is to answer the question - what is the fair and reasonable wage rise in all of the circumstances, including the State government wages policy and the other economic evidence?  This more closely describes the obligation on the Commission in s 26 of the Act than does the question posed by the Minister but it too, with respect, does not fully describe the Commission’s task. 

121 Notwithstanding the recent insertion of s 26(2A) and (2B) the Commission is still to act according to equity, good conscience, and the substantial merits of the case without regard to technicalities or legal forms: s 26(1)(a) of the Act.  It is to have regard for the interests of the persons immediately concerned whether directly affected or not and, where appropriate, for the interests of the community as a whole: s 26(1)(c).

122 In doing so, it must take into consideration the matters in s 26(1)(d) and, in this case where the Commission is making a public sector decision, it also must take into consideration not just the public sector wages policy but also the financial position and fiscal strategy of the State and the financial position of the Department of Health: s 26(2A). 

123 The legislation does not make s 26(2A) a standard against which the other considerations are to be assessed.  Nor is s 26(2A) of greater weight than those matters in s 26(1)(d).  Section 26(2C) specifies that ‘[t]he matters the Commission is required to take into consideration under subsection (2A) are in addition to any matter it is required to take into consideration under subsection (1)(d).’  Each of the considerations in s 26(1)(d) and (2A) are to be given their own weight.  Deciding what is the fair outcome of this arbitration under s 42G of the wage increases for the 2014 Agreement involves a balancing of the parties’ respective positions in the context of those considerations.

56      I adopt and apply that approach to the application of s 26(2A) of the Act.  As to the overall financial position of the State under s 26(2A)(b) the Commission in Court Session had before it material relevant to this issue and observed at pars 131-133 as follows:

131 This arbitration is occurring at a time when the State is experiencing the most challenging fiscal environment for many years and ongoing global economic uncertainty.  While the state of the national economy is not a consideration relevant to this matter, the state of the economy of WA, and the capacity of the Department of Health to pay, are part of the considerations under s 26(1)(d) and (2A).

132 The rate of growth will be the slowest rate of growth since 1990‑91 and State final demand is expected to fall by 1% in 2014 15.  Revenue estimates in the Mid Year Review have been revised down since the 2014‑15 Budget by $5 billion over the forward estimates period, due mainly to weaker commodity prices, particularly for iron ore and oil, as well as lower taxation revenue forecasts due to moderating economic conditions and weaker employment and wages growth.  There is an estimated general government sector operating deficit in 2014‑15 of $1.3 billion.  Net debt for the total public sector is forecast to increase from $20.8 billion at 30 June 2014 to reach $30.9 billion by 30 June 2018.

133 We recognise that compliance with the government wages policy is crucial to achieving a return to budget surplus.  The Department of Health is funded for a wage increase consistent with government wages policy and would be expected to absorb the cost of any additional wage increase.  The Department’s budget is already under pressure.

57      These observations in relation to the State’s overall financial position are generally consistent with the thrust of the submissions of the Authority in these proceedings. I adopt and rely on the above observations of the Commission in Court Session for the purposes of determining this matter.  Additionally, as to the specific financial position of the Authority, I take into account the submissions made in relation to its labour costs and the further requirement for an efficiency dividend. 

Compression of wage relativities

58      The Union said the effect of compressing relativities was recognised in the Trades and Labor Council of Western Australia v Minister for Consumer and Employment Protection, Chamber of Commerce and Industry of Western Australia (2006) 86 WAIG 1633, where the Commission stated at par 95 that relativities between classifications in a particular award in question did compress as a result of flat dollar arbitrated safety net adjustments. However, the Commission found that in that instance, there was no evidence that compression of wage rates since 1991 eroded skill based career paths in awards or had any other detrimental effect at the industry or workplace level. 

59      The Authority drew the Commission’s attention to par 112 of the 2012 State Wage order which it said is intended to relate to employers and employees in award reliant industries, which does not apply to railcar drivers. Par 112 provides that:

our past flat-dollar increases inevitably will have had the effect of compressing relativities between wage rates in awards.  We also appreciate, as submitted by CCIWA, that many awards do require the attention of the parties to those awards if they are to be modernised, however, in the meantime, employers and employees in award-reliant industries in WA are still bound by them.

60      In the State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641 and the State Wage Case [2011] WAIRC 00399; (2011) 91 WAIG 1008 the Commission stated that there was no direct evidence of issues arising from any compression of award relativities from past flat-dollar increases.  However, the Commission in Court Session observed that it is open to any party to seek to vary an award to address issues which arise from any compression of relativities.

61      The Authority contended that the Union’s argument advanced in respect to the RCD Award was dealt with by the Commission as presently constituted previously, in the 2011 enterprise order case, where the Commission rejected the Union’s argument that the flat dollar amounts awarded in the State Wage Cases from 2006 to 2010 rendered the base rates of the RCD Award obsolete. In that decision the Commission rejected the claim that rates of pay for railcar drivers had not kept pace with inflation.

62      In successive State Wage Cases, the Commission in Court Session has recognised that awarding flat dollar increases to the SMW and in turn, extending that increase to award wages generally, will have the effect of compressing relativities in awards. In recent years, since 2006, and except for 2012, the Commission has awarded flat dollar increases to the SMW. It has done so on the basis the flat dollar increases will tend to favour the lowest paid, and hence, is consistent with the Commission meeting its statutory obligation to “meet the needs of the low paid” under s 50A(3)(a)(ii) of the Act.

63      In the 2006 State Wage Case, the Commission in Court Session considered the issue of percentage based or flat dollar adjustments. Whilst quite lengthy, the extract refers to the history of discussion of compression of relativities, particularly at the federal level, and the requirement for this Commission to have regard to the needs of the low paid in determining the SMW. At pars 85-97 the Commission observed:

85 The claim before us seeks a percentage increase in order to avoid any further compression of relativities which has occurred from a succession of past flat dollar safety net increases. The last occasion which the AIRC and this Commission awarded a percentage increase as opposed to a general flat amount increase was in 1991. Its reasons for doing so were as follows:

“In the February 1989 Review decision (endorsed in the August 1989 National Wage Case decision), the Commission said that:

"… minimum rates awards will be reviewed to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other minimum rates awards." In many awards, this facet of restructuring has not even commenced; in others, it is incomplete. The process has involved establishing specific relativities, defined in percentage terms, between classifications within awards and aligning classifications across awards. Without denying the possibility of redefining the vertical relativities in consequence of granting flat rate increases, we are reluctant to introduce this complication while the exercise is incomplete. More generally, we are concerned that considerations of cost, if accepted as a ground for flat rate increases, will very frequently cause a compression of relativities and that such a compression will create strong pressures for corrective increases. We acknowledge that flat rate increases have been granted in the past, but we have misgivings about the repetition of that approach particularly given the course set by the August 1989 National Wage Case Decision.

Further reason for the approach adopted in relation to minimum rates and supplementary payments was the benefit to low wage and salary earners who suffered from inequities "due to the level of their award rates and their lack of substantial overaward payments". (52) That process is delivering substantial increases to low paid workers and is preferable to flat rate increases as a method of assisting them. ”

86 From 1991 to 1996 there were six flat money adjustments to award rates generally. In 1997 the AIRC considered whether to award a further flat increase. On that occasion it was submitted by the Commonwealth Government and State Governments that joined them that internal award relativities were no longer an important part of the award system. The AIRC disagreed. In its August 1997 decision in Print P1977 it held:

“Such relativities remain an important determinant of the fairness of the minimum wage structure within awards. How can award rates be fair if they do not properly reflect the relative skills, responsibilities, etc of jobs covered by the award? If an award system has to be fair, then it is no answer, as the Joint Governments suggest, to leave it to workplace agreements to establish appropriate relativities. The point is stronger when one considers that it is common for workplace agreements to build uniform percentage increases on to the established award rates. Furthermore, the provision of skill-based career structures in awards is a significant way in which employees are encouraged to improve their skills, contribute to higher productivity and advance to higher wages.

We agree with the Joint Employers who submitted that the shift to competency-based classification structures in awards, which commenced with the August 1989 National Wage Case decision (the August 1989 decision) [7 August 1989; Print H9100], has generally operated successfully and has been regarded as important by the award parties. We also agree with their submission that the 18 month interim period provided by Schedule 5 of the WROLA Act will give parties the opportunity to consider the manner in which they wish to maintain viable award career structures having regard to the new Act. Further, the matter of relativities may be the subject of consideration by the Commission as a result of applications already filed by employers requesting the Commission, pursuant to s.106 of the new Act, to determine principles in respect of allowable award matters.

Given our views on skill-based classification structures reflecting proper relativities, we would have preferred to grant a percentage increase throughout the award structures, thereby maintaining existing relativities. However, given the need to limit the addition to AWOTE - for the reasons elsewhere discussed - and weighing the competing needs of the low paid and the desirability of relativity preservation, we have chosen to give priority to the former.

We add two further points in relation to relativities. First, because of our concern about the disturbance of relativities throughout the structure, we have awarded the $10 per week increase to all award classifications rather than adopt the arbitrary cut-off of AWOTE, as proposed by the Joint Governments. Second, what is said about the deterioration in the position of employees at the lower end of award structures, relative to movements in agreements, inflation and productivity, applies with even greater force at the higher end of award structures.”

87 In 1998 the AIRC again considered the importance of internal relativities in its April 1998 decision. On that occasion it awarded three flat dollar amounts of $14.00, $12.00 and $10.00 a week. The low paid received the highest amounts. When delivering its decision the AIRC observed:

“As on earlier occasions, we are concerned about the effect of flat rate increases on award wage relativities. In 1989 the Commission introduced the Minimum Rates Adjustment principle in an attempt to correct inequities in the wages system because of the potential for those inequities to cause industrial disputation and instability. That Principle was concerned primarily with relativities across awards at the key classification level but also with vertical relativities. The resulting relativity levels were widely adopted in minimum rates awards. Flat increases tend to distort vertical relativities. The distortion is greater if the flat increase does not apply above a certain level. All of the parties advocating an increase in the safety net in these proceedings sought a flat increase. In addition a percentage increase, whilst preserving relativities, necessarily maintains the relative position of those at the lower end of the award hierarchy. Flat increases reduce the relativities in percentage terms. There will often be a tension between the maintenance of relativities and addressing the needs of employees at the lower award levels. The approach we have adopted on this occasion is deliberately designed to give a greater increase to award employees at the lower levels, whilst not neglecting the interests of those at the higher levels who also receive no payments other than those prescribed in the award. We have taken the question of relativities into account in formulating the adjustment on this occasion. The tapering of the adjustment at two points in the scale has an effect on relativities which is almost the same as the effect which would result if the $20.60 component of the ACTU claim was granted in full. We add that the maintenance of vertical relativities is a significant reason for our decision to reject the Joint Governments' proposal that any increase awarded only apply to employees classified at or below the C10 rate in the Metal Industry Award.”

88 In 1999, the AIRC dealt with the submission that an adjustment should only apply to employees classified at or below the C10 rate in the Metal Industry Award. It also dealt with ACTU’s claim which sought a percentage adjustment 5% of award rates above $527.80 per week. On that occasion it determined it should award a flat money increase rather than a percentage increase on the basis it would provide proportionately greater assistance to the low paid. The AIRC stated (Print R1999):

“In previous cases the Commission has drawn attention to the requirement that rates prescribed in awards be fair, to the importance of internal relativities between classification levels and to the need to provide increases for employees who, although employed at the higher levels, are dependent upon safety net increases for increases in pay. Each of these factors, on its own, favours an increase at all levels. Furthermore, we do not accept the Joint Governments' submission that the current legislative framework compels the conclusion that employees on higher award classification rates should generally not be eligible for award safety net increases. In all of the circumstances the approach we have adopted, both the amounts and the form of the increases, strikes the right balance between the competing equity and cost considerations which the parties have drawn to our attention in their submissions.”

89 In May 2000, the AIRC considered the issue again. In its decision in Print S5000 the AIRC considered what it had said in its decisions in 1997, 1998 and in 1999 and observed at paragraphs [118] and [119]:

“[118] The last occasion on which the Commission awarded a percentage adjustment to award rates generally was in the April 1991 National Wage Case.31 Since that time there have been six adjustments to award rates generally which have been in flat money amounts. Relativities have been compressed further by the tapering of the amount of the increase at the higher levels in 1998 and 1999. As a consequence the rate of increase in award rates at the lower levels has continually exceeded the rate at the higher levels. Each of these decisions has given priority to the needs of the low paid and in relative terms the low paid have benefited significantly from this approach. We have decided to maintain the approach of granting a flat dollar increase on this occasion. We indicate now, however, that on the next occasion that award rates are reviewed we shall expect to be addressed on whether a return to percentage adjustment is appropriate to ensure that the award system provides fair wages for employees paid at the middle and upper award classification levels. A proper examination of that question will necessarily include an assessment of whether the reasons for percentage adjustments contained in the extract from the April 1997 decision which we have set out remain valid.

[119] In light of these considerations we turn to examine once again the Joint Coalition Governments' proposal that there should be no increase in award rates above the C10 level in the Metal Industry Award. The Joint Coalition Governments' support for a cap at that level rests primarily on their interpretation of the Act "particularly the intended role of the award system as a genuine minimum safety net protecting the low paid and the Act's emphasis on the Commission's role in encouraging the spread of agreement making." They also submit that the introduction of a cap will moderate the increases in aggregate wage costs and produce better distributional outcomes. In its April 1999 decision the Commission decided that the legislative framework does not compel the conclusion that employees on higher award classification rates should generally not be eligible for award safety net increases. Having reviewed the arguments on this occasion we see no reason for a different conclusion now. Furthermore, whilst it would be open to us to introduce a cap, we do not think it would be desirable to do so having regard to the internal relativity issues to which we have just drawn attention and our conclusion that growth in enterprise bargaining has not been materially inhibited by the application of safety net increases to all award rates. Whilst a cap would be likely to lead to a lower rate of growth in aggregate earnings the amount we intend to award is justifiable and, in the current economic environment, unlikely to lead to excessive growth in earnings overall. In relation to distributional outcomes, as we indicate elsewhere we are reluctant to place much reliance on the household income data presented to us.”

90 All of the major parties made submissions on this issue in 2001. In its decision in May 2001 (Print PR002001) the AIRC dealt extensively with those submissions at paragraphs [130] to [139] and awarded three incremental flat dollar amounts.

91 This matter was last considered by the AIRC in May 2002. On that occasion the ACTU sought again a flat dollar increase and said that the Commission should not pay any regard to the fact that the implementation of its claim would compress relativities further. In particular the ACTU contended that the ongoing relevance of middle and upper case classification rates of pay needed a comprehensive response not a piecemeal solution and the ACTU signalled its intention to ensure that proper skilled based classification structures are not allowed to wither on the vine but are addressed in a responsible and economically sustainable way consistent with the requirements of the WRA. Further they said that the matter would not be agitated in the National Wage Case which can focus on delivering a decent increase for the lower paid. The Commission noted the ACTU submissions in their decision at [156] in PR002002 and reiterated what they said in their decisions in September 1994 [Print L5300] and October 1995 [Print M5600] that the Commission would not grant applications to restore pre-existing relativities on the basis that such relativities have been compressed by the granting of flat dollar arbitrated Safety Net Adjustments.

92 This is the first occasion this Commission has been called upon to consider awarding arbitrated Safety Net Adjustments without after having first considered a National Wage Decision whereby pursuant to section 51(2)(a) of the Act, the Commission unless it determines there are good reasons not to, must make a General Order to adjust by the amount of any change in the rate of wages under the national wage decision. Consequently until 2006 this Commission in a sense "inherited" the statutory framework of the WRA when it made a General Order to adjust wages under section 51. On this occasion the Commission is not so constrained. It must act according to its own statutory framework including the principal objects of the Act.

93 Unlike the AIRC under the now repealed section 88B(2) of the WRA this Commission when adjusting the safety net is not by statute expressly required to have regard to the specific requirements of fair minimum standards for employees in the context of living standards generally prevailing in the Australian community; economic factors, including levels of productivity and inflation and the desirability of attaining a high level of employment and the needs of the low paid. Whilst this Commission’s statutory considerations could be said to encompass such matters, the matters this Commission is required to consider pursuant to section 26(1) are much broader in scope.

94 Whilst the Commission is not expressly required to pay regard to the needs of the low paid, we are of the opinion that such a consideration is implied as a matter the Commission can consider within the scope of the principal object in section 6(ca), in section 26(1)(a) and the opening words of section 26(1)(c) where such a consideration is raised on the evidence before it. In this matter the Commission has before it a substantial amount of cogent and uncontradicted evidence that supports the submission that the Commission should take into account the needs of the low paid and that they will be disadvantaged if they are not awarded a pay increase which will assist them to keep up with increases in the cost of living. We are of the opinion that in awarding an increase on this occasion that the increase we grant should assist the low paid to do so.

95 Although the evidence before us clearly shows that relativities between classifications in the Metal Trades (General) Award 1966 have compressed as a result of flat dollar arbitrated Safety Net Adjustments, there is no evidence or submission before us that compression of wage rates since 1991 has eroded skill based career paths in awards or had any other detrimental effect at the industry or workplace level. If any party wishes in the future to address this issue it is open for them to do so in an application relating to a specific award under section 40 of the Act or for parties or those granted the right to be heard to raise it in any future proceedings for an adjustment of award safety net rates of pay. Whilst we note what the AIRC said in September 1994 and in October 1995 about not granting applications to restore pre-existing relativities on the basis that such relativities have been compressed by flat dollar increases we do not consider this Commission is necessarily bound to follow the decisions of the AIRC in respect of this issue.

96 We take into account also the evidence of Ms Cusworth in response to a question from Mr Cox: a flat rate increase ensures one is targeting the biggest proportional increase for those who are the key target of applying the minimum wage. A percentage increase will obviously flow through to higher levels and that potentially will affect more people. It will increase the labour costs arising from the decision by a little bit more than it otherwise would. A flat rate increase achieves the best outcome in terms of targeting those people who will benefit most from the decision. The more broadly based the increases are and the further up the pay scale they stretch, the more is the likelihood of seeing a slightly larger effect on employment and inflation.

97 The increase we propose will therefore be a flat dollar amount. We consider that where compression in relativities in particular awards have been a cause for concern, this can be addressed by an individual award variation application pursuant to s. 40 of the Act.

64      In the extract above, and in later State Wage Case decisions, the Commission has repeatedly said that in any case where it is contended that the compression of relativities in a particular award(s) has had a detrimental effect then an application can be made under s 40 of the Act to address it.  Such is the case with the present applications. Accordingly, it is implicit in this observation, and in that this matter has been heard before me, after conferring with the Chief Commissioner in accordance with Principle 10.3 of the Commission’s Wage Fixing Principles, set out below, that I do not accept the argument of the Authority that it would be preferable for these proceedings to be dealt with by the Commission in Court Session in a State Wage Case, under s 50A of the Act.

65      Principle 10 allows an application to be made for a variation in wages above or below the award minimum conditions.

10. Making or Varying an Award or issuing an Order which has the effect of varying wages or conditions above or below the award minimum conditions

10.1 An application or reference for a variation in wages which is not made by an applicant under any other Principle and which is a matter or concerns a matter to vary wages above or below the award minimum conditions may be made under this Principle.  This may include but is not limited to matters such as equal remuneration for men and women for work of equal or comparable value.

10.2 Claims may be brought under this Principle irrespective of whether a claim could have been brought under any other Principle.

10.3 All claims made under this Principle will be referred to the Chief Commissioner for him to determine whether the matter should be dealt with by a Commission in Court Session or by a single Commissioner.

66      There is no barrier to this matter being dealt with by an application under s 40 of the Act, consistent with the Principles.  I accept, based on the materials before the Commission in these proceedings, that in both awards there has been, since 2006, a degree of compression of relativities within the classifications prescribed by both awards. Taking the original relativities in 2006 as the benchmark, the compression is relatively small for rail car drivers under the RCD Award and is considerably greater for those in the REA levels 5 and above under the RE Award. For those in the REA level 3A and below, their relativity to the REA level 4 rate has somewhat improved over the same period. The question is whether this should be remedied and if so, how.

State minimum wage determination

67      For the following reasons, I am not persuaded that there is any merit in the view that there should be established a nexus between cumulative SMW movements, expressed in percentage terms, and the adjustment of all award classification rates in the awards the subject of these proceedings.

68      For the purposes of establishing the SMW as a result of the introduction of s 50A into the Act by the Labour Relations Legislation Amendment Act 2006, and its subsequent review and adjustment, the Commission in Court Session has been required by s 50A to have regard to a number of statutory criteria. Those criteria are set out in s 50A(3) which provides as follows:

50A. Rates of pay etc. for MCE Act and awards, annual State Wage order as to

…

(3) In making an order under this section, the Commission shall take into consideration —

(a) the need to —

(i) ensure that Western Australians have a system of fair wages and conditions of employment; and

(ii) meet the needs of the low paid; and

(iii) provide fair wage standards in the context of living standards generally prevailing in the community; and

(iv) contribute to improved living standards for employees; and

(v) protect employees who may be unable to reach an industrial agreement; and

(vi) encourage ongoing skills development; and

(vii) provide equal remuneration for men and women for work of equal or comparable value;

and

(b) the state of the economy of Western Australia and the likely effect of its decision on that economy and, in particular, on the level of employment, inflation and productivity in Western Australia; and

(c) to the extent that it is relevant, the state of the national economy; and

(d) to the extent that it is relevant, the capacity of employers as a whole to bear the costs of increased wages, salaries, allowances and other remuneration; and

(e) for the purposes of subsection (1)(b) and (c), the need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment; and

(f) relevant decisions of other industrial courts and tribunals; and

(g) any other matters the Commission considers relevant.

69      An important factor, and one the Commission in Court Session has paid particular attention to in the past, is the needs of the low paid in s 50A(3)(a)(ii).  Despite the adoption of flat dollar adjustments to the SMW in past years, there has never been any recognition by the Commission of a direct relationship between equalising percentage adjustments in the SMW and the adjustments of award rates of pay generally. The adjustment to award rates of pay, under s 50A(1)(b), consistent with a SMW General Order, is given effect by variations to awards under s 50A(1)(c).  Any increase to the minimum award rate of pay, arising out of a SMW determination, is based on the determination of the Commission in Court Session to increase the SMW, be it on a flat dollar basis or a percentage adjustment respectively.

70      If the Union’s claim to increase the base rates of pay in these awards by the cumulative percentage increase in the SMW were to be granted, it is not difficult to envisage a flow of such applications to the Commission, therefore having the potential to undermine the integrity of the SMW adjustment process, and the specific criteria set out in s 50A(3) of the Act, in particular, the criteria of meeting the needs of the low paid.

71      Additionally, as set out in exhibit R2, when a comparison is made between the percentage increases in the actual rates of pay for employees under the RE Award, compared to the cumulative increase in CPI from 2006 to 2014, up to the REA level 7 rate, which represents the bulk of employees covered by the award, the award wage rates have increased by more than CPI over this period. If an objective of setting a minimum wage is to at least preserve the real value of wages, as referred to by the Commission in Court Session in the 1981 State Wage Case then certainly for that group of employees just identified, this objective is met: State Wage Case (1981) 61 WAIG 1894. I accept overall however, that increases to the REA’s levels 8 to 10 have achieved somewhat less than cumulative CPI over this time, but not substantially so.

72      For rail car drivers, from the materials before the Commission, a comparison between the total cumulative CPI increases of 25.93% from 2006 to 2014, to the actual percentage increases received over the same period, shows the classifications received between 4.93% and 6.83% less than the cumulative CPI figure.  I note however, that some caution needs to be applied to the measurement of CPI, depending on whether the year-end or through the year rate is used for comparison purposes. I also make that observation in the knowledge that, as noted earlier, the base rate of wage for RCD Award employees, as at 2006, was substantially higher than it otherwise would have been, by reason of the incorporation of rates of pay previously applying under industrial agreements. Additionally, the rate was increased by the incorporation of the SERA allowance in the base rates. 

73      It is also significant to note that as exhibit R2 shows, the employees under both awards enjoy rates of pay, under their respective industrial agreements, with one or two exceptions, that are significantly higher than the respective awards rate of pay, adjusted for both cumulative CPI increases and the increases sought in the Union’s claim in these proceedings.

Relativities, skill based career paths and minimum rates adjustment

74      From the late 1980s the focus of the system of wage determination, at both State and federal levels, shifted to the enterprise level.  Part of this development was the introduction of specific principles into wage fixing principles in the various jurisdictions, to accommodate this. In Western Australia, this included the adoption of the Enterprise Bargaining Principle and the Structural Efficiency Principle. The SE Principle in particular, placed a focus on reforming the award system to provide more flexibility and scope for efficiency in industries and enterprises to which awards applied. As a part of this process, the SE Principle contemplated the development of skill related career paths, the creation of appropriate relativities between different categories of employees within an award at the enterprise level, and the establishment of properly fixed minimum rates of pay (see for example State Wage Case (1992) 72 WAIG 191 at pp 199‑201; 204-209).

75      Thus, the setting of properly established minimum rates and the creation of appropriate relativities between classifications in an award were important features of the system of wage fixation.  As the system of wage fixing developed in the 1990s, with an even greater focus on enterprise level outcomes, awards became the safety net below which terms and conditions of employment could not be adjusted. Nonetheless, the SE Principle process for awards, to ensure they constituted a modern award safety net, remained important.

76      The RCD Award was made as a new award on 24 February 2006: The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority [2006] WAIRC 03895; (2006) 86 WAIG 457. The RE Award, was substantially modernised, through major variations, and was the subject of an order of the Commission on 17 March 2006:  Public Transport Authority of WA v The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch [2006] WAIRC 04051; (2006) 86 WAIG 807. Both awards were made and varied respectively, by consent. As I have already noted, the RE Award incorporated appropriate relativities with the metal trades award classifications, as set out in Part 4 – Classification Structure and Rates of Pay. The REA level 4 was the benchmark classification, pegged at 100% of the metal trades tradesperson’s rate.

77      Shortly prior to the modernisation of the RE Award, in March 2006, on 18 January 2006, the RE Award was varied to insert some new classifications and rates of pay, which were subsequently incorporated into Part 4: The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority [2006] WAIRC 03494; (2006) 86 WAIG 291. In those proceedings, again by consent, the parties informed the Commission that the amendments to the award were made to incorporate new classifications and to update others to reflect the modernisation of the RE Award’s operation (see T5). 

78      The RCD Award replaced the then Government Railways Locomotive Engineman’s Award 1973.  It was noted that the rates of pay in the new award, containing the classifications, which have been unchanged to date, incorporated the rates of pay that had been payable under industrial agreements previously applying (see TT12-13; 32).  As there had been very substantial changes to the industry up to that time, many of the classifications in the former Locomotive Engineman’s Award were obsolete and were removed.  Given the higher rates of pay in the new RCD Award, incorporating rates from prior industrial agreements, including the former SERA allowance, the base rates of pay were considerably higher than those in the former Locomotive Engineman’s Award. Thus the safety net for the employees covered by this award is already elevated.

79      Significantly, in 2010-2011, in the enterprise order proceedings, which was a large arbitration, a substantial body of evidence and submissions were put before the Commission in relation to terms and conditions of employment for rail car drivers. A key issue in that case was appropriate rates of pay. The Union proposed a departure from the current classification structure that was not accepted by the Commission. In my decision, in determining the respective claims and counterclaims of the parties, I determined what the rates of pay should be, and what the relativities should be within the classifications.  At pars 405-411 of my reasons I said:

Driver Coordinators

405 In relation to the Driver Coordinators, I accept the evidence of Ms Kent that based upon the Skills Council Report of June 2006, some work of Driver Coordinators was not adequately reflected in the JDF for the position. Whilst the skills assessment was not of itself a work value assessment, it is a necessary first step in considering any change in work value. The Commission in these proceedings is entitled to, and does, take into account that evidence, in its assessment of the applicant and the Railcar Driver Group positions.

406 I accept, consistent with Mr Appleby’s evidence, that the training workload as contended by Ms Kent may have been an over estimation. Relevant also, is the prospect of the new Training Officer position in the near future, although it is difficult to make an assessment of this factor at this point in time.

407 From all of the material before the Commission, I do not consider that a margin of 111% in the Award is an adequate reflection of the work of Driver Coordinators. I see no reason in principle, based upon the assessment of the work undertaken by Driver Coordinators that the relativity that was agreed between the parties in 2007, and as again offered by the respondent in 2009, without substantial changes to conditions of employment had that offer been accepted, should not be restored.

408 It must be regarded that the agreement reached in 2007, and the offer made in 2009, reflected at least an informed view by the respondent, as to the worth of the work of Driver Coordinators. This to a degree is supported by aspects of the Skills Council Report.

409 Additionally, the 117% margin as then applicable reflects the present margin for Driver Coordinators under the Transwa agreement. I also see no reason in principle why it should be materially different in the context of the Driver Coordinators and Railcar Drivers in the TTO operations, given the history to which I have referred. Thus the margin for the life of the enterprise order will be 117%.

Driver Trainers

410 I am not persuaded on the evidence and submissions to depart from the respondent’s amended position, to restore the Driver Trainer relativity to 106% of the Driver’s rate. Driver Trainers will receive the benefit of the increase to apply to base rates of wages by the application of this margin under the enterprise order.

411 Furthermore, unlike Driver Coordinators, there is no change in responsibilities of the position of Driver Trainer, or any lack of prior recognition of duties beyond those established for the role, that has been demonstrated on the evidence and the submissions.

80      Clauses 18.5-18.7 of the enterprise order made from those proceedings were in the following terms:

18.5 The following provisions apply to Trainees:

(a) The wage rate applicable to Trainees shall be 85% of the wage rate applicable to the classification of a Railcar Driver for which the employee is being trained.

(b) This rate will apply to a Trainee for the duration of the training period until the Trainee has passed the assessment in accordance with the Driver Training Program.

(c) Trainees shall be required to undertake training during all shift work hours across the whole roster cycle.

18.6 The wage rate for a Driver Trainer shall be 6% above the applicable base rate for a Railcar Driver.

18.7 The wage rate for a Driver Coordinator shall be 17% above the applicable base rate for a Railcar Driver.

81      As set out above, the principal contention of the Union was that the base rates in the awards should be increased by the cumulative percentage increase in adjustments to the SMW since 2006 and up to 2014 inclusive. Whilst it did not appear in the grounds of the applications, a substantial basis for the claim, as revealed in the evidence, was to elevate the award base rates as a floor to bargain for an industrial agreement. This was very clear on the evidence of the Secretary and Mr Debenham.

82      The elevation of award base rates to achieve bargaining leverage is not a proper basis to restore award relativities. The purpose of restoration of relativities, as set out above, is to preserve the integrity of skill based career paths, based on the skills and responsibilities of classifications in an award. To the extent this factor may be relevant to the higher level classifications under the RE Award, then any adjustment to relativities must be across the board, to preserve relativities and the integrity of the classification structure of the award.  However, it is not open to the Union to “cherry pick”, by only pursuing changes at the higher classification levels, whilst preserving the improvements in relativities at the lower classification levels. The Union cannot have it both ways. If there is to be a proper restoration of relativities then it needs to reflect the structure of the award classifications, relative to the benchmark rate, as at 2006.

Conclusion

83      I have carefully considered all of the evidence and the submissions made in these proceedings.  I accept that compared to the original relativities established in the RE Award when it was modernised in 2006, in particular for the higher level classifications, which are the more skilled positions, there has been some erosion of relativities to the key classification REA level 4 rate.  I therefore accept that on this basis, those in higher skilled positions may be seen to have had the value of their work, relative to the established skills related career paths, in award terms at least, diminished. Correspondingly, for those in the lower level award classifications, in REA level 3A and below, their relative position has improved somewhat.

84      The established relativities expressed in Part 4 of the RE Award, as at 2006, was the appropriate structure based on the metal trades classifications relativity. I consider if there is to be any restoration of relativities then they are the appropriate benchmark. There was no submission made in these proceedings, to the effect that the relevant award based relativities prescribed by Part 4, either as at 2006, or now, were no longer appropriate.  No submissions were made that the skills related career path set out in Part 4 is no longer appropriate to the industry.

85      In the case of railcar drivers, the relativities as at 2006 have changed somewhat in the current rate structure, but only slightly. However, they were revisited by the Commission in the extensive arbitration in the enterprise order proceedings.  The Commission, based on the evidence and the history of negotiations between the parties, determined that the appropriate relativities should be as set out at par 79 above. In my view, but for the supplementary submissions of the parties, they provide a cogent basis upon which any award based relativities should be restored.

86      Unlike industrial agreements, which are essentially instruments of the parties, given statutory effect under the Act, awards are instruments made by and of this Commission. The Commission may, independently of the parties, initiate proceedings of its own motion under the Act, to vary them.  The parties’ interests are of course, under s 26(1)(c) of the Act, to be taken into account.  In the case of enterprise specific awards, like the awards the subject of these applications, perhaps more so than otherwise. Therefore, notwithstanding my preliminary conclusions in relation to the basis of any adjustment to relativities, given my rejection of the central contention underlying the Union’s claims, and the parties’ supplementary submissions, the most appropriate course on this occasion is to dismiss both applications. I would expect future claims, if any, to also encompass work value considerations.