2024 WAIRC 00210
COMMISSION TO MAKE ORDERS AS TO TERMS OF THE CITY OF ALBANY INDUSTRIAL AGREEMENT 2023

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2024 WAIRC 00210

CORAM
: SENIOR COMMISSIONER R COSENTINO

HEARD
:
MONDAY, 22 APRIL 2024, TUESDAY, 23 APRIL 2024 AND WEDNESDAY, 24 APRIL 2024

DELIVERED : TUESDAY, 14 MAY 2024

FILE NO. : APPL 81 OF 2023

BETWEEN
:
CITY OF ALBANY, WESTERN AUSTRALIAN MUNICIPAL, ADMINISTRATIVE, CLERICAL AND SERVICES UNION OF EMPLOYEES
Applicant

AND

(NOT APPLICABLE)
Respondent

CatchWords : Industrial Law (WA) – Application for registration of industrial agreement - City of Albany Industrial Agreement 2023 – Application for Commission to make orders as to specified matters – s 42G – Wage rates – Monetary allowances – Whether provisions for pay increases beyond the nominal expiry should be included – Orders issued
Legislation : Fair Work Act 2009 (Cth)
Industrial Relations Act 1979 (WA)
Result : Orders issued
REPRESENTATION:

Counsel:
FIRST APPLICANT : MR C BEETHAM, OF COUNSEL
SECOND APPLICANT : MR Z DOHERTY, OF COUNSEL
Solicitors:
APPLICANT : MINTERELLISON
RESPONDENT : FOGLIANI LAWYERS

Case(s) referred to in reasons:
Australian Municipal, Administrative, Clerical and Services Union v City of Albany, Andrew Sharpe [2023] WAIRC 00958
Burswood Resort (Management) Ltd v Australian Liquor, Hospitality & Miscellaneous Workers’ Union, Western Australian Branch [2003] WASCA 102
Federated Municipal and Shire Council Employees Union of Australia and City of Melbourne & Ors; The Municipal Employees (Western Australia) Award 1982 [1983] CthArbRp 336; (1983) 290 CAR 206
Re City of Albany [2020] FWCA 3663
Re Fire and Emergency Services Authority of Western Australia, United Firefighters Union Australia West Australian Branch [2007] WAIRC 00469; (2007) 87 WAIG 1283
Re Mars Australia Pty Ltd [2023] FWC 2402
Re Tramways Employees (Melbourne) Award 1949 [1951] CthArbRp 528; (1951) 72 CAR. 26
Western Australian Police Union of Workers & Anor v Commissioner of Police [2017] WAIRC 00822; (2017) 97 WAIG 1749
Western Australian Police Union of Workers v Commissioner of Police [2021] WAIRC 00047; (2021) 101 WAIG 293


Reasons for Decision

1 Albany, in Menang Country, is a place of stunning natural beauty, of fishing and farming, of ancient traditional culture and Menang-Noongar moort, of significant colonial heritage, and of ANZAC history. The Albany region is a place where a community of some 41,000 people live and work all year round. From what I hear, most Western Australians who do not call Albany home, rate it at or near the top of their favourite places to visit.
2 Undeniably, the Albany region has grown to be such a special and esteemed place in no small part because of the role of the local government, the City of Albany (the City). The future of this community is very much in the hands of the City and so, is dependent on the dedication, skills, knowledge, experience and work of the City’s employees, officers, councillors and volunteers.
3 In order for the City to fulfil its statutory functions and deliver quality services to the community, it must attract and retain a dedicated, committed and skilled paid workforce. The pay and conditions afforded to this workforce are key to the City’s capacity.
4 For many years, the City negotiated with Australian Municipal, Administrative, Clerical and Services Union as bargaining representative for its workforce, to reach collective agreements that were aimed at achieving precisely this objective. Prior to 2022, these agreements were registered with the Fair Work Commission under the Fair Work Act 2009 (Cth) (FW Act). The City of Albany (General Workers) Enterprise Agreement 2011 (2011 Agreement) expressly recognised that it was the mechanism by which the City was to achieve its aim of ‘providing services that are responsive to the community needs and aspirations…’ by creating an organisation where ‘[e]mployees are dedicated to working for the good of Albany and its Community and are recognised as a valuable resource…and are rewarded for doing so.’: cl 5.
5 The City of Albany Enterprise Agreement 2019 (2019 Agreement) was the last agreement the parties made under the FW Act. It was approved on 15 October 2019 and operated from 22 October 2019. It reached its nominal expiry date on 30 June 2022.
6 On 1 January 2023, the local government sector transitioned from the federal industrial relations system to the state industrial relations system. In the meantime, the Western Australian Municipal, Administrative, Clerical and Services Union of Employees (WASU) In these reasons, I use the abbreviation ‘WASU’ to refer to both the state registered union, the Western Australian Municipal, Administrative, Clerical and Services Union of Employees and the Western Australian branch of the federal union, the Australian Municipal, Administrative, Clerical and Services Union unless the precise identity of the organisation is relevant. Similarly, references to “parties” may be a reference to the state union or the federal union. Which entity is intended is generally apparent from the context. For instance, the federal union is party to agreements and proceedings under the Fair Work Act 2009 (Cth).
and the City engaged in negotiations for an industrial agreement to replace the 2019 Agreement. The negotiations stalled. WASU and the City agreed on many of the terms of a new agreement, but did not agree on three matters:
a. What wage increase should apply during the nominal term of the new agreement on 1 July 2023, 1 July 2024 and 1 July 2025.
b. What increase should apply to allowances contained in the new agreement, on each of those dates.
c. Whether the new agreement should provide for a wage increase after its nominal expiry date if certain conditions concerning negotiations for a replacement agreement are not met.
7 Having reached this impasse, the parties jointly applied to the Western Australian Industrial Relations Commission (the Commission) under s 42G of the Industrial Relations Act 1979 (WA) (IR Act) for the Commission to register a new agreement in the terms the parties agreed about, together with any other provisions as ordered by the Commission about the matters that the parties themselves had not agreed.
Outline of parties’ positions
8 The matters the parties agreed on were set out in a draft agreement to be titled City of Albany Industrial Agreement 2023 (2023 Agreement). The terms of the draft agreement substantially involve a roll-over of the 2019 Agreement. There are no substantive changes to the terms and conditions of employment compared with the 2019 Agreement, save for wage and allowance increases, changes to the Outside Employees Level Matrix Tool, and whatever changes result from this arbitration.
9 It is estimated that the 2023 Agreement will apply to 450 employees. This includes part-time and casual employees.
10 The 2023 Agreement will operate from the date of its registration and have a nominal expiry date of 30 June 2026.
11 Although the 2023 Agreement will commence at a future time, namely, when it is registered, it provides for retrospective pay increases. Wage rates for 2022/2023, described as ‘current rates’ are set out in three clauses. Clause 52 contains the agreed 2022/2023 hourly and annual wage rates for ‘General Employees’. General Employees, also known as ‘the Inside Workforce’, include clerical and administrative employees, library staff, recreation centre staff, visitor and tourism centre employees, cleaners, community service employees, rangers and emergency service employees.
12 Clause 53 contains the agreed 2022/2023 hourly and annual wage rates for the ‘Outside Employees’. Outside Employees includes employees working in sanitary, recycling and waste management services, street sweepers, construction and maintenance and parks and gardens.
13 Clause 54 contains the agreed 2022/2023 hourly and annual wage rates for Daycare Employees. Daycare employees are those who work in the Albany Regional Daycare as cleaners, kitchen hands, gardeners, early childhood educators, and day care centre managers.
14 The wage rates in each clause are set by reference to classification levels. The classifications are defined in clauses 49 to 51. There are nine classification levels for General Employees. The Level 1 adult wage starts at $52,268.84 per annum. Level 9 step 4 has a wage rate of $109,983.90 per annum.
15 There are eight classification levels for Outside Employees, from Municipal Employee Entry Level 3 at $57,936.06 per annum through to $79,134.90 for a Qualified Tradesperson Level 10 step 3.
16 There are nine classification levels for Daycare Employees from a Level 1 Support classification with a rate of $51,333.88 per annum to Level 6 Managers with a rate of $92,517.88 per annum.
17 The wage clauses also include steps or bands within each level, that is, an incremental progression in wage rates. Under clause 17, employees are eligible for incremental progression to the next band within a level at the conclusion of 12 months, subject to providing satisfactory service over the preceding 12 months and acquiring or utilising such new skills as specified in any Personal Performance Development Review.
18 The 2023 Agreement contains relatively generous provisions for redundancy pay: cl 43.1.2, pay for attending union meeting and union business: cl 48.3, additional superannuation contribution matching: cl 20.9 and three days’ paid festive leave: cl 31.8.
19 Clause 19 of the 2023 Agreement contains several monetary allowances, such as allowances for being on-call, for meals when working overtime, for acting as a first aid officer, for provision of own tools if classified as a carpenter, for provision of uniform and for working in hazardous conditions or conditions involving particular hardship.
20 The parties agreed that the 2022/2023 wage rates and the monetary allowances specified in the 2023 Agreement should be increased during the life of the 2023 Agreement with effect from 1 July 2023, 1 July 2024 and 1 July 2025.
21 As to the matters that were not agreed:
22 WASU seeks pay increases of 7.6% on 1 July 2023, 5.8% on 1 July 2024 and 5% or ‘Perth CPI’, whichever is greater, on 1 July 2025.
23 WASU seeks an order for allowances to be increased on 1 July 2023, 1 July 2024 and 1 July 2025 by whichever is greater of the wage increase ordered by the Commission, or ‘Perth CPI’.
24 WASU seeks the inclusion of a clause making provision for pay increases tied to ‘Perth CPI’ post the nominal expiry date of the Agreement, if certain conditions are met, including if a replacement agreement has not been agreed within 6 months of the nominal expiry date.
25 For the purpose of WASU’s claims, ‘Perth CPI’ is the percentage change in All Groups’ Consumer Price Index for Perth in the preceding year to the March quarter. For example, Perth CPI as at 1 July 2026 would be the change in Perth CPI from 1 April 2025 to 30 March 2026.
26 The City seeks pay increases of 4% for General Employees and Daycare Employees on each of 1 July 2023, 1 July 2024 and 1 July 2025. It seeks pay increases for Outside Employees of $4,000 on 1 July 2023 and 4% on 1 July 2024 and 1 July 2025.
27 The City seeks an order for allowances to be increased on 1 July 2023, 1 July 2024 and 1 July 2025 by the same percentage that wages are increased, in accordance with the Commission’s order on that issue.
28 The City opposes the inclusion of any provision for pay increases beyond the nominal expiry date of the 2023 Agreement.
The arbitration
29 This arbitration did not involve any contest about facts. The relevant background context, documents, and history were largely agreed.
30 The City relied on the evidence of its CEO, Mr Andrew Sharpe and its Executive Director, Corporate and Commercial Services, Mr Matthew Gilfellon, both of whom travelled to Perth from Albany to be present at the hearing. They told the Commission about the nature of the City’s functions as a local government, its revenue sources, its budgeting processes, and the considerations it had given to formulating its offers of wage increases in negotiations for the 2023 Agreement.
31 The City also called Mr Aaron Morey, Chief Economist for the Chamber of Commerce and Industry Western Australia. Mr Morey produced an expert report addressing the health of the Western Australian Economy, Consumer Price Index movements, both past and forecast, and wage growth in Western Australia, past and forecast.
32 WASU relied on the evidence of two of its delegates employed by the City, Mr Andrew Greenwood and Mr Thomas Wenbourne, who travelled to Perth from Albany to be present at the hearing. They explained to the Commission the work they do for the City. They talked about their involvement in bargaining for collective agreements at the City, and in particular, the circumstances leading to the inclusion of different forms of clauses to maintain wages in line with inflation. They referred to pre-2022 wage increases, and that this had given them an expectation about wage increases that should have been applied in 2022 and into the future. They also touched on how increases in costs of living impacted on them personally.
33 WASU’s Assistant Branch Secretary, Ms Jill Hugo, gave evidence about her involvement in organising and representing WASU’s members at the City over the last 14 years. Ms Hugo has, over that period, developed close and strong relationships with members and delegates at the City, and has been involved in bargaining with the City since 2010. Based on this history, she understood members were passionate about maintaining particular conditions as a ‘safety net.’ She recounted the kinds of things members were telling her about cost of living pressures.
34 Ms Hugo was able to provide a good picture of the composition of the City’s workforce by gender, occupation and classification level. She told the Commission about the circumstances which led to the City’s employees voting to approve a variation to the 2019 Agreement with the effect that they would forego a 2.1% wage increase in 2020, despite WASU recommending against the variation.
35 Ms Hugo talked about the bargaining for the 2023 Agreement, a dispute that arose about the post-nominal expiry date increases under the 2019 Agreement leading to enforcement proceedings being commenced in the Industrial Magistrates Court, and the termination of the 2019 Agreement.
36 All of the witnesses were frank, honest and credible. I am grateful to them for the assistance they provided to the Commission.
37 I was referred to, and have considered, the following categories of documents:
a. The collective agreements in place between 2011 to 2019.
b. A variation to the 2019 Agreement registered by the Fair Work Commission in 2020.
c. Various emails related to the negotiations for the 2013 Agreement.
d. Past City of Albany Annual Reports.
e. City of Albany Annual Budget for 2023/2024.
f. Australian Bureau of Statistics (ABS) 2021 Census data for Albany Local Government Area (2021 Census).
g. ABS CPI and household spending data, namely the ABS Consumer Price Index, Australia, March Quarter 2024’ report (ABS CPI March Quarter 2024 Report).
h. Government of Western Australia Economic Profile February 2024 and April 2024.
i. Workforce breakdown by classification, band, pay rate and gender.
j. A summary of pay increases for local governments under industrial agreements registered with the Commission.
38 WASU also tendered evidence of the spending of one of its employee witnesses, comparing the employee’s costs of particular goods and services on particular dates between 2019 and 2024. I understand WASU put this evidence before me to demonstrate that employees are facing rising costs of living. While I have no hesitation in accepting that employees have had to deal with, and continue to deal with, rising household costs, I have not placed any weight on these documents which do not provide any meaningful comparison, or, where they do provide a comparison, do not demonstrate costs have risen in any greater amount than the increases in wages paid by, and proposed to be paid by, the City of Albany.
Section 42G principles
39 Section 42G says:
(1) This section applies where —
(a) negotiating parties have reached agreement on some, but not all, of the provisions of a proposed agreement; and
(b) an application is made to the Commission for registration of the agreement as an industrial agreement, the agreement to include any further provisions specified by an order referred to in subsection (2); and
(c) an application is made to the Commission by the negotiating parties for an order as to specified matters on which agreement has not been reached.
(2) When registering the agreement, the Commission may order that the agreement include provisions specified by the Commission.
(3) An order referred to in subsection (2) may only be made in relation to matters specified by the negotiating parties in an application referred to in subsection (1)(c).
(4) In deciding the terms of an order the Commission may have regard to any matter it considers relevant.
(5) When an order referred to in subsection (2) is made, the provisions specified by the Commission are, by force of this section, included in the agreement registered by the Commission.
(6) Despite section 49, no appeal lies from an order referred to in subsection (2).
40 In s 42G proceedings, there is no onus in the usual sense. The parties put their respective cases and the Commission decides the matter in accordance with equity and good conscience: Western Australian Police Union of Workers v Commissioner of Police [2021] WAIRC 00047; (2021) 101 WAIG 293 at [14].
41 In determining a dispute under s 42G, the Commission:
a. Has a broad discretion to reach a conclusion based on the evidence before it;
b. Can and should consider a range of elements including the IR Act’s objects set out in s 6, and any other matter it considers relevant;
c. Is subject to the requirements of s 26;
d. Is not bound to take into account the Statement of Principles made under s 50A(1)(d)(i) of the IR Act.
Re Fire and Emergency Services Authority of Western Australia, United Firefighters Union Australia West Australian Branch [2007] WAIRC 00469; (2007) 87 WAIG 1283 [377]; Western Australian Police Union of Workers v Commissioner of Police [2021] WAIRC 00047; (2021) 101 WAIG 293 at [37], [61].
42 Ultimately, my task is to balance the competing interests of WASU, its members employed by the City, other employees of the City, the City itself and the community.
43 The assessment of the competing proposals advanced by each party requires that there be a firm evidentiary basis to justify any orders I may make. Though the Commission is not bound by the rules of evidence, this does not mean the Commission is able to act without any evidence. This has been a longstanding principle of industrial arbitration. In Re Tramways Employees (Melbourne) Award 1949 [1951] CthArbRp 528; (1951) 72 CAR. 26, the Commonwealth Court of Conciliation and Arbitration stated at 27 - 28:
Although the Court is not bound by rules of evidence, this had never been held to mean that the Court would act without evidence. If a tribunal were to so act, obvious injustices and insecurities could result. ...
The industrial system has been functioning for so long that even an inexperienced advocate should know that an industrial claim is not to be had for the asking, but is necessarily dependent upon the quality of the relevant evidence produced...
Wage increases 2022-2025
44 Both parties agree that wages should increase annually to ensure employees are fairly rewarded for their work and so that the City can attract and retain the resources it needs. This is not a case involving claims for increases to wages based on changes in work value, productivity, or working conditions.
45 WASU says the increases it seeks keep employees’ remuneration in line with inflation. WASU fairly points out that the City’s employees are not highly paid workers. The average adult full-time wage of the City’s employees (excluding overtime, penalties and allowances) is less than $70,000 per annum: Exhibit A6.
46 There are two grounds for WASU’s claimed increases of 7.6%, 5.8% and 5% or Perth CPI.
47 First, WASU says that such increases are consistent with the longstanding and well-understood industrial practice that has existed in the City’s collective agreements going back at least to the 2011 Agreement, whereby annual wage increases have met or exceeded inflation. In other words, it is the status quo. As a consequence, employees have an expectation that their wages will at least keep pace with inflation as measured by Perth CPI.
48 Second, WASU says increases in line with inflation as measured by Perth CPI will ensure that the value of employees’ labour is not diminished because of a failure of their wages to keep up with the costs of living. It makes the obvious and uncontroversial point that inflation or increases in the cost of living disproportionately affect low-paid workers because they do not have as much disposable income to absorb those increases compared with higher paid employees. Further, increases in line with the change in Perth CPI ensure that employees are not moving backwards in terms of the value of their labour.
49 WASU says that the City’s revenue has increased from 2018/2019 to 2022/2023, and expenses have increased commensurately. It says the City is in a healthy financial position, and has the ability to meet any increase in employee expenses.
50 Finally, WASU says the Western Australian economy is healthy, with gross state product forecast to grow and the wage price index (WPI) also rising. The WPI for Western Australia increased by 4.7% in the December quarter of 2023. This is relevant to the broader labour market and labour market competition.
51 The City’s proposed increases of $4000 or 4% in the first year and 4% in the following two years is based on the following considerations:
a. It is in line with or better than wage increases that have been agreed to by other local governments in agreements registered under the IR Act since 1 January 2023.
b. It is in line with and at or above forecast inflation for the financial years 2023/2024 and 2025/2026.
c. It is broadly in line with or cumulatively above predicted All Industries and Public Sector WPI growth during the nominal term of the 2023 Agreement, involving a cumulative wage increase of 12.5% over the term compared with predicted wage growth of 11.5%.
d. It has been properly budgeted for and takes into account the City’s budgetary constraints, given its functions as a local government.
e. From 2014-2022 cumulative wage growth at the City was 24.3% compared with 18.2% in the Western Australian Public Sector WPI and 17.7% in Western Australia All Industries WPI.
52 The City says these objective considerations mean that the increases it proposes are sustainable and therefore fair to the City, fair to employees concerned and provide certainty for administrative purposes.
History of wage increases
53 Both parties rely, with different emphasis, on historical wage increases in support of their positions.
54 WASU says that the fact past wage increases have met or exceeded movements in Perth CPI means that practice ought to continue.
55 The City says the fact that past wage increases have, cumulatively, exceeded movements in Western Australia’s WPI for both Public Sector and All Industries means the proposed wage increases are fair.
56 Both premises are factually true. But they do not meaningfully indicate what is a fair quantum of increases for the 2023 Agreement. A past industrial agreement is not necessarily, or perhaps at all, a yardstick of what is fair and reasonable in the circumstances that have existed since the agreement was reached or in the situation that prevails before the Commission at the time of arbitration. As Commissioner Matthews observed in Western Australian Police Union of Workers & Anor v Commissioner of Police [2017] WAIRC 00822; (2017) 97 WAIG 1749 at [72], it is neither here nor there that parties agreed to certain terms and conditions in the past. A past agreement is a product of the circumstances existing at the time it was made, and the usual give and take involved in forming it.
57 WASU’s claim involves pay increases exceeding actual changes in Perth CPI for 2023 (5.8%) and 2024 (3.4%), and forecast changes in Perth CPI for 2025 (3%). The actual and forecast change in Perth CPI over the life of the 2023 Agreement is 12.2%, compared with WASU’s claimed increases of at least 18.4%. WASU’s submissions, therefore, do not establish why wages should increase in excess of inflation or to the extent that it claims.
58 The City says the pay increases it proposes are broadly consistent with the pay increases provided for in the industrial agreements registered with the Commission which contain provisions for wage increases in the years 2023 to 2025. But I note that the table the City produced in this regard shows that increases for regional local governments are greater on average than those for metropolitan local governments.
59 The difference may be explained by the different labour market condition in regional areas. For example, according to the Government of Western Australia’s Economic Profile published in April 2024, the unemployment rate in the Great Southern region in the December quarter 2023 was just 2.7%, compared with Perth’s unemployment rate of 3.7%. Mr Morey reported that labour shortages being experienced in the Great Southern region have likely contributed to weaker business confidence in the region, compared with Western Australia as a whole. He based this evidence on the results of the Chamber of Commerce and Industry’s Regional Pulse report of March 2024, which was annexed to his report.
Interests of employees concerned: CPI & increased costs of living
60 Inflation, that is, the rising living costs faced by households, is clearly an important consideration. It is the principal interest of the employees concerned.
61 Rigorous and reliable data about inflation and rises in the cost of living in the Albany region is not available to me. There can be no doubt that costs of living in Albany have increased since 2019. Costs will likely continue to increase during the nominal term of the 2023 Agreement.
62 In his report, Mr Morey explained that CPI measures quarterly changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure of a population group. In Australia, the CPI is calculated by the ABS, using several modes of collection to maintain the representativeness of samples and quality in the data.
63 Mr Morey notes that the ABS presents various series of CPI metrics, with the most commonly referenced being All Groups CPI and Trimmed Mean. The All Groups CPI comprises all index components, weighted by the average of eight capital cities. In Western Australia, the most commonly referenced metric is All Groups CPI Perth. This is measured in the same way as All Groups CPI but only for the metropolitan area of Perth.
64 Since 2021, the Perth CPI ex electricity is more commonly referenced, as it removes the electricity sub-component of the CPI basket and therefore removes the significant fluctuations caused by State Government household electricity credits.
65 Mr Morey said that it is theoretically possible to calculate CPI for the Great Southern region, but ABS does not calculate CPI outside the capital cities and the necessary data is not readily available, so the time and effort to collect the necessary data would be prohibitive.
66 Accordingly, the movement in Perth CPI is the most reliable metric available to me to gauge inflation as experienced by Great Southern region residents.
67 Mr Morey was asked whether he agreed that lower income earners would feel the brunt of inflation more than high income earners. Mr Morey noted that because CPI involves many subcategories of goods and services, not all components will be relevant to all people, and different components will be more or less relevant to different subsets of the population over time. He also noted that particular sub-categories have contributed to the rates of inflation since 2019: in the early days of the COVID -19 pandemic, significant supply-side disruptions meant strong inflation for goods, whereas in recent times the contributions have been more from services and rental costs.
68 Although Mr Morey did not agree with the proposition put to him, I can take judicial notice of the fact that lower income earners have less disposable income from which to meet any rise in living costs.
69 Ms Hugo’s opinion is that regional areas always feel changes to the cost of living more than Perth. This opinion broadly aligns with Mr Morey’s conclusion at [14] of his report that:
While Western Australia has performed well over the past year, it is clear that both the business and household sectors in the Great Southern region have comparatively weaker economic conditions than the state as a whole.
I accept many of the City’s employees are experiencing financial stress. Mr Morey also reported that the high cost of living and interest rates are having the biggest drag on consumer confidence in the Great Southern region.
70 As I have already said, the City’s claimed wage increases would meet past and forecast inflation measured by Perth CPI, taking into account the cumulative effect of wage increases. For the Outside Employees, the City’s proposed increases will outpace past and forecast inflation as measured by Perth CPI. For the rest of the workforce, the City’s proposed increases will outpace the past and forecast rate of inflation by 0.3%, once the compounding effect of the increases is taken into account.
71 WASU’s claimed wage increases exceed past and forecast inflation measured by Perth CPI by 6.2% without compounding. Its rationale is that it seeks to recoup the ‘lag that occurred from when the [2019] Agreement was retired from…[and] certain years where there were no wage increases under the [2019] Agreement, so it’s kind of staggered backwards or lagging backwards’.
72 I understand these submissions to be directed to the fact that the agreed ‘current rates’ for the 2023 Agreement represent a 6% increase to the rates payable under the 2019 Agreement as at its nominal expiry date. The change in Perth CPI in the 12 months ended 30 March 2022 was 7.6%. The difference is 1.6%.
73 I also understand the submissions are a reference to a registered variation to the 2019 Agreement with the effect that no wage increase was payable to employees on 1 July 2020, when the relevant change in Perth CPI for the 12 months to 30 March 2020 was 2.1%: Re City of Albany [2020] FWCA 3663
74 WASU seeks to include these differences, amounting to 3.7%, in the wage increases for 1 July 2023 and 1 July 2024.
75 But employee wages have not fallen behind inflation to the extent of 3.7%. The increases that were applied in two years of the 2019 Agreement exceeded the movement in Perth CPI in those years. Any ‘lag’ between movement in wages and movement in Perth CPI from the commencement of the 2019 Agreement, to the commencement of the 2023 Agreement, is 2.3%.
76 In any event, WASU’s case for recouping this ‘lag’ in the 2023-2025 wage increases, is conceptually awkward and illogical.
77 The rates of pay applicable from 1 July 2022 is a matter that the parties have agreed.
78 Similarly, while WASU did not agree to the 2019 Agreement variation, the majority of employees affected by the variation did. The Fair Work Commission’s decision records that 298 employees would be affected by the variation, of whom 279 cast a valid vote and 211 voted in favour. The variation was registered in accordance with the FW Act.
79 The parties have established and agreed on what rate of pay will apply from 1 July 2022 until 30 June 2023. They did so after the 2019 Agreement variation and with knowledge of it and its effects. Inflation rates prior to 1 July 2022 are therefore irrelevant.
80 To build historical ‘lag’ into a pay increase for 1 July 2023, or subsequent pay increases, is akin to undoing the deals already made. It is inappropriate for me to embark on that course. WASU cannot, on the one hand, be in agreement with the 2022 wage rates, and at the same time try to increase the agreed rate through the side door of annual increments.
81 I would observe, as an aside, that there is nothing commercially nonsensical or unreasonable in having agreed the 2022 wage rates. The increase of 6% represented an amount exceeding movements in WPI in Western Australian. Table 3 of Mr Morey’s report records that ‘WA All Industries WPI Growth’ in 2022 was 2.7% and ‘WA Public Sector WPI Growth’ in 2022 was 1.1%. Local government forms part of the WA Public Sector matrix. In this context, the increase to the wage rates WASU agreed for 2022 are generous.
82 WASU’s proposal also fails to account for the fact that many employees’ pay has increased, or will increase, or has both increased and will increase, in amounts greater than the percentage increases in the 2023 Agreement because they were or will be eligible to progress to the next band within their level on the anniversary of commencing in that level. The increases for bands within each level represent an increase in wage rate of around 2%. The data provided to me about employees’ current position within each level shows that 23% of employees covered by the 2023 Agreement are currently at the top band within their level. For these employees, unless promoted, they will not have pay progression. However, a proportion of them will have reached the top of the band since 2019, and so have had the benefit of those increases in the past. And 77% of employees will be eligible for one or more increment increases during the nominal term of the 2023 Agreement.
83 Additionally, some employees will also have increases in pay as a result of promotions and reclassification. Mr Gilfellon explained that the City has implemented initiatives to ensure there are opportunities for career progression, such as reclassifying positions, and redrafting position descriptions so that they refer to two levels, rather than one, to ensure an employee can potentially achieve up to eight increments with the same position description. Both he and Ms Hugo also noted that the parties had agreed to changes to the 2023 Agreement’s Outside Employees Level Matrix Tool to enable employees to be more easily promoted to a higher level through experience rather than requiring formal qualifications.
84 Not all employees will achieve increases in their wages from progression within or between levels. However, a sufficiently significant proportion of the workforce will, such that I consider this is a relevant factor where inflation is used as a justification for claimed increases.
85 Finally, WASU’s reliance on the movement in Perth CPI does not take into account the compounding effect of past increases. Mr Morey explained that compounding results from the application of a percentage increase to an amount that incorporates a previous increase. The total increase is not simply a matter of adding up individual rates of increase. Mr Morey reports that a 4% increase each year over three years represents cumulative growth of 12.5%, whereas WASU’s proposed increases represent cumulative growth of at least 19.5%.
Western Australia’s economy
86 Some aspects of the state of the economy of Western Australia are relevant to my determination. In particular, inflation forecasts are relevant, as discussed above. Additionally, the Western Australian WPI movements are relevant, as is data about labour force participation, as they reveal things about the labour market, and what is needed to maintain wages at rates that are sufficiently competitive to ensure the City can attract and retain employees. The general health of the Western Australian economy is relevant to the City’s prospects of future growth in revenue as well the likelihood of it facing increased operating costs.
87 The Government of Western Australia Western Australia Economic Profile published in April 2024 (Economic Profile), forecasts gross state product, a measure of the total economic production of the state to rise 1.75% in 2023/2024 and 2% in 2024/2025. I note that this represents slower growth in gross state product compared with the 2022/2023 period when the rise was 3.5%.
88 WASU points out that the nominal wage growth in Western Australia, measured by WPI, has increased over the past three years, and was 4.7% in the December quarter 2023. The Economic Profile forecasts Western Australia’s annual average wages will rise 4.25% in 2023/2024 and 3.5% in 2024/2025. While nominal wage growth over the past three years has, for most of the time, been lower than inflation this has resulted in falling real wages. Real wages in Western Australia grew for the first time in the December quarter 2023 as the rate of inflation dropped to its lowest level in two years.
89 The Economic Profile also relevantly shows that:
a. Growth in employment and total monthly hours worked in Western Australia has moderated over the past year. Annual average employment is forecast to increase 2.5% in 2023/2024 and 1.75% in 2024/2025. Average monthly hours worked in all jobs rose 3.6% in March 2024, down from the record high growth of 7.7% in February 2022.
b. While employment growth during the economic recovery from the COVID-19 pandemic was broad based across industries, divergent changes in employment by industry has now emerged, with large rises in average employment in healthcare and social assistance and falls in average employment from March 2023 to March 2024 in public administration and safety.
c. Western Australia’s unemployment rate in the Great Southern was 2.7% in the December quarter 2023 compared with 3.6% for all of Western Australia, and 3.7% for Perth.
d. Western Australia’s employment participation rate averaged 69.2% in 2022/2023 and is forecast to decline slightly to 68.8% in 2024/2025.
90 Mr Morey’s evidence about the state of the Western Australian economy was to the effect that the economy has performed strongly over the past year. WA’s domestic economy grew 5.5% over 2023, more than double that of any other state. At the same time, the labour force has continued to grow, reaching a record size in January 2024. This growth has largely been underpinned by business investment from a number of large-scale resources projects ramping up, and the iron ore majors operating close to capacity. The Government investment has also contributed to this result, with the Western Australian Government’s Asset Investment Program driving investment.
91 Mr Morey also stated at [3], [6] and [8] of his report:
3. Household consumption has gradually slowed over the past two years as inflationary pressures and elevated interest rates have forced households to tighten their belts. While household consumption continues to grow, this is at a slower pace and being supported by strong population growth. Indeed, consumption per capita has started to decline, indicating individual consumers have reduced their spending
…
6. Looking ahead, economic growth in WA is expected to slow considerably.
…
8. Overall, [Chamber of Commerce and Industry WA (CCIWA)] expects State Final Demand to grow 4.75% in 2022-23, slowing to 2.5% in each of 2024-25 and 2025-26. Gross State Product (i.e. including net exports) is expected to grow 1.5% this financial year, increasing to 1.75% in 2024-25 then falling to 1.25% in 2025-26. A further slowdown in China's property sector, escalating conflict in the Middle East and more persistent inflation than anticipated are the key risks to this forecast…
92 The evidence before me concerning the state of Western Australia’s economy supports the view that wages should not remain stagnant during the nominal term of the 2023 Agreement. But it does not provide a justification for wage increases during the nominal term of the 2023 Agreement in the amounts claimed by WASU. On the other hand, the increases proposed by the City are broadly consistent with and supported by the economic evidence.
The City’s interests
93 The City seeks increases in fixed percentages, rather than by reference to Perth CPI which must be ascertained at a later point in time. Its reason is that a percentage increase in each year provides it with certainty so that it can calculate and forecast employee expenses, and prepare a balanced and responsible budget on that basis. This also provides greater certainty for long term planning.
94 Mr Morey’s evidence supports this rationale. His evidence was that:
30. CPI can be forecast using a combination of econometric modelling and qualitative analysis. As different forecasters utilise different models and may have differing views on which factors influence CPI, these forecasts may differ. Common variables used in determining inflation forecasts include, but are not limited to, past inflation, economic growth, interest rates, wage growth, unemployment rates and population growth.
31. CPI can technically be forecast as many periods into the future as one would like. However, the further into the future a forecast is, the greater the error associated with that forecast. For this reason, it is typical to only forecast between two to three years into the future. Any forecast that is further than three years in the future is typically labelled a projection - that is, it is considered to trend towards a steady state.
95 He also notes that the COVID-19 pandemic has created a volatile inflationary environment, increasing the difficulty in accurately forecasting inflation.
96 WASU did not contest either this evidence or the City’s rationale. They are valid considerations that weigh in favour of an order by which wages are increased in a fixed amount.
City’s capacity to bear the cost of wage increases
97 I am confident that the City can bear the cost of annual wage increases in the order of 4% per annum. The City’s witnesses confirmed that the City has budgeted for its proposed increase in the 2023/2024 financial year, and there is no reason to consider it cannot bear the same increases in the following financial years.
98 The City’s evidence was that the budgeting process was a detailed, thorough and careful process involving managers, directors and the elected Council. The process is designed to ensure:
a. The budget is balanced.
b. The City’s business, that is, service delivery to the community and meeting its statutory obligations, is maintained.
c. The City’s asset base is maintained to an adequate level.
d. The City’s financial position is sustainable for the future, so that long term planning can be implemented.
e, Significant rate shocks are avoided, and rate rises are fair and reasonable.
99 WASU points out that the City had a surplus of revenue after expenses in both years 2018/2019 and 2022/2023 of over $12 million. However, in both years, roughly $11 million of the City’s revenue was from non-operating grants, subsidies and contributions. Non-operating grants, subsidies and contributions are amounts received by the City specifically for the acquisition, construction of new or the upgrading of non-current assets: Exhibit U3. Operating revenue, that is, revenue from rates, operating grants, fees and charges and interest earnings exceeded operating expenditure by less than $1 million in both years: Exhibit U2, Exhibit U3.
100 The budgeted position for the 2023/2024 financial year involves roughly similar revenue of $79 million compared with 2022/2023. However, expenses are budgeted to increase from $77 million to $87 million, so that, excluding non-operating grants, subsidies and contributions, the City will have an operating loss in 2023/2024: Exhibit U4
101 WASU’s written submissions correctly concede that the expenses have increased in an amount exceeding the increases in revenue. It noted that a significant contributor to the increase in expenses is materials and contracts, and submits the City should reign in its spending in this regard. It led no evidence as to how the City could reign in that spending, or what impacts doing so would have on the City’s assets, or the services it provides to the community.
102 WASU also relies on data which demonstrates the City’s rate revenue has grown by an average of 4.73% in the period from 2013/2014 to 2020/2021: Exhibit U1. In more recent years though, rate growth has been more modest: 3.38% in 2019/2020 and 0.97% in 2020/2021. In any event, in isolation this evidence says very little about the City’s capacity to pay further increases in wages to employees.
103 Nevertheless, the evidence demonstrates the City has had healthy financial performance in recent years, resulting in positive changes in total equity. Its financial reports represent balanced and responsible financial management.
104 Mr Sharpe explained that future wage increases beyond those budgeted for will need to be recovered through an increase in revenue, and that the only real lever the City has to increase revenue is through increases in rates, fees and charges. Mr Gilfellon also confirmed that the City’s operational and non-operational grant income tends to be fixed, so that the only revenue the City has control over is rates, fees and charges.
105 The other option for the City would be, in Mr Sharpe’s words to ‘structure [employee costs] within the existing budget framework’. I understand this to mean to limit employee costs by reducing either headcount or employee hours, but Mr Sharpe was careful to point out that he did not want to pre-empt what the City’s Council might decide in this regard. Mr Gilfellon added that while spending less in some areas is always an option, many functions and services are required to be provided by legislation. It is the City’s non-core services which are more likely to be the subject of any cost reductions. Non-core services include the visitor centre, the Anzac Museum, and the Daycare Centre. WASU did not challenge any of this evidence.
106 The bottom line is that increases in wages beyond what has been budgeted for will result in any one or more of a combination of a reduction in the City’s total equity, increases in rates, fees and charges or reduction in the quantity or quality of community services. In all of these cases, the community, represented by current and future residents, will pay.
107 WASU has not established that the 2023/2024 Budget involves any excessive or unreasonable expenditure. It is a responsible and reasonable budget, with operating expenses exceeding operating revenue. It is possible that rate revenue will increase in the future from increases in the rateable value of property without the City increasing the rate in the dollar at which rates are calculated. However, this is a highly uncertain proposition and there is no evidence before me to make any finding in this regard. It is, therefore, safe to infer that in order to have a balanced budget in future years, without any reduction in services, the City will need to increase the rate in the dollar at which rates are calculated and/or increase fees and charges. Future wage increases beyond what has been budgeted by the City will need to be paid for by the City’s residents and ratepayers.
Community interest
108 This leads to the community interest which I may have regard to under s 26(1)(c) if it is appropriate to do so.
109 The median income of residents in Albany is relatively low: as at the 2021 Census, it was $710 per week. Ratepayers bore an increase to rates in the order of 4.95% in 2023/2024.
110 Many of the City’s employees are themselves ratepayers. Others are residents who contribute to the City’s revenue through payment of fees and charges for the City’s facilities and services.
111 Of course, it is in the community’s interest that the City be able to attract and retain a workforce sufficiently skilled, experienced and capable of delivering services to it.
112 In light of these matters, I think this is a case where it is appropriate to have regard to the community interest. It is not a determinative factor, but reinforces my reluctance drawn from the other considerations, to make an order for increases in wages beyond what the City has budgeted and proposed, particularly as WASU has not established a sound basis for the increases it seeks.
Distortion of relativities
113 The City proposes an increase on 1 July 2023 of $4,000 for Outside Employees and 4% for all other Employees. A $4,000 increase represents an increase of between 5% and 6.9% for Outside Employees depending on their level and band. Outside Employees would therefore receive a greater percentage increase than the rest of the workforce.
114 The rationale for the difference in proposed pay increases is that the City has experienced relatively high turnover in the outside workforce. Mr Sharpe said turnover had increased recently from an historical level of under 10% up to 12% or 15%. He said the City is keen to reverse this, and attract and retain employees in this area.
115 Mr Gilfellon told the Commission that competition for jobs for outside workforce occupations is higher than other areas, because of projects like the Albany Ring Road construction, which is being undertaken by private contractors. He also noted that Fly-in, Fly-out positions are readily available to Albany residents because Rio Tinto has flights to and from the Albany airport, and the outside workforce has a readily transferable skill set for that labour market.
116 Ms Hugo agreed that there has been higher turnover in the outside workforce. She noted that there was a time when the City had at least 10 vacancies in the outside workforce to fill. As a result, work had been done by the parties on the Outside Employees Level Matrix Tool to make it easier to employ people based on experience rather than just qualifications and tickets.
117 Mr Sharpe indicated that the Albany Ring Road contract was due to finish in October, and so he thought the market might be ‘a little easier for us’ once construction was completed.
118 During the hearing, I expressed my concern that the difficulty with retention and recruitment might be a temporary situation, while the proposed pay increases would permanently distort the existing relativities between Outside Employees and the balance of the workforce.
119 This concern is heightened by the fact that the respective workforces are gendered: around 87% of Outside Employees are male, while all of the Daycare Employees and about 72% of the General Employees are female. The proportion of female General Employees is closer to 80% at levels where the annual wage rate is less than $80,000 per annum.
120 The average wage level of Daycare employees is lower than the other two cohorts at $54,332.54. The average wage for Outside Employees is around $63,000 and for General Employees it is around $69,500: Exhibit A4.
121 Passing on a higher increase in wages to Outside Employees only will distort existing relativities within the 2023 Agreement. This may, in turn, undermine the attainment of equal remuneration for men and women for work of equal or comparable value, bearing in mind the Daycare workforce in particular. I consider these to be important relevant factors.
Determination of wage increases during the 2023 Agreement’s nominal term
122 A 4% increase on 1 July 2023 is broadly consistent with inflation as measured by Perth CPI, and Western Australian Public Sector WPI growth. If Albany was in the Perth metropolitan area, I would be satisfied that a wage increase in this order was appropriate.
123 However, the evidence before me suggests the labour market in the Albany region is particularly competitive. The unemployment rate is very low - lower than Perth and Western Australia. Mr Sharpe, Mr Gilfellon and Ms Hugo all gave evidence of high turnover in the outside workforce. Mr Morey referred to the limited availability of skilled labour in the Great Southern as supressing business confidence in the region.
124 These factors lead me to conclude that a pay increase slightly greater than 4% is warranted for 1 July 2023.
125 The concerns I have about the proposed $4000 increase to Outside Employees outlined above are such that I am unwilling to make an order in terms that will entrench that increase into the wage rates to address these competitive factors.
126 I am prepared to make an order that the 2023 Agreement include a term providing for a one-off payment to Outside Employees of an amount representing the difference between $4,000 and the increase in wages on 1 July 2023. So that this payment has the desired effect on recruitment and retention, it should be calculated and paid at a point in time in the future.
127 To account for the fact that this one-off payment will not increase the wage rates, and therefore, future increases will not be calculated on a higher wage rate, and to attempt to reflect the tight labour market in Albany, there should be a 0.5% uplift on the 1 July 2023 increase of 4% to all employees, so that the 1 July 2023 increase be 4.5%. This will ensure there is no distortion of relativities.
128 I am satisfied that the increases proposed by the City of Albany for 1 July 2024 and 1 July 2025 of 4% per annum are fair and reasonable having regard to all the relevant considerations discussed above.
129 My proposed orders will provide all employees with a 12.5% increase in wages during the nominal term of the 2023 Agreement. This is consistent with and at or above inflation and forecast inflation from 1 April 2022 to 30 March 2025. It therefore meets the need for wages to keep pace with increases in costs of living during the 2023 Agreement’s nominal term.
130 The increases I propose are also consistent with, or above forecast all industries wage growth, and forecast public sector wage growth during the nominal term of the 2023 Agreement. It is an amount which the City can bear without compromising services, or excessively increasing rates, fees and charges to Albany’s residents and ratepayers.
Increases to allowances during the nominal term of the 2023 Agreement
131 WASU seeks increases in the allowances under clause 19 of the 2023 Agreement on 1 July 2023, 1 July 2024 and 1 July 2025 in whichever is greater of the amount that wages are adjusted or Perth CPI. Its position in this regard is based on past industrial practice.
132 However, the past industrial practice was not that allowances were adjusted in the manner WASU now proposes.
133 Clause 19.1 of the 2011 Agreement provided for the adjustment of allowances on 1 July each year ‘equal to CPI (Perth)’. That is, the increase was equal to CPI even if CPI was less than the wage increase. Clause 17 of the 2016 Agreement and Clause 19 of the 2019 Agreement are in this same category. Adjustments to allowances under the 2019 Agreement were therefore at a lower rate than adjustments to wages.
134 Clause 22.1 of the 2013 Agreement provides for adjustment of 5% in the first year (regardless of CPI) and by Perth CPI in the years thereafter. Again, the first year increase was 5% regardless of whether it was more or less than CPI for that year, and the subsequent years were Perth CPI regardless of whether that amount was more or less than the amount wages were adjusted.
135 WASU's justification does not hold up
136 I also note that the 5% increase in wages of 4.5% on 1 July 2023 and 4% on 1 July 2024 that I propose exceed Perth CPI at those points in time and so, WASU's position on those increases is academic. The issue is practically confined to what should happen to allowances on 1 July 2025.
137 The City seeks increases in the same amount that wages are adjusted, without reference to a Perth CPI flaw. It desires certainty and simplicity for the purpose of forecasting labour costs and administering the increases.
138 The Commission’s Statement of Principles, made under s 50A(1)(d) of the IR Act is relevant to my determination, even if it is not binding in these proceedings. Principle 6 provides:
6. Adjustment of Allowances and Service Increments
6.1 Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect the relevant change in the level of those expenses.
6.2 (deleted)
6.3 Allowances which relate to work or conditions which have not changed and service increments may be adjusted as a result of the State Wage order, or, if an award contains another method for adjusting such allowances, in accordance with that other method.
6.4 In the absence of any other prescribed method, where the Commission has determined that it is appropriate to adjust existing allowances relating to work or conditions which have not changed or service increments for a monetary safety net increase, the method of adjustment shall be as follows: divide the monetary safety net increase by the rate of pay for the key classification in the award which applied immediately prior to the safety net increase, and multiply the resulting figure by 100.
6.5 ….
139 The allowances in clause 19 are of two types. Some allowances are related to the manner in which or the conditions under which work is performed and others are expense related.
140 In the first category, I am satisfied that the wages should be adjusted in line with movements in wages generally. That is, the allowances in clauses 19.3, 19.5, 19.7, 19.8 and 19.9 should be adjusted by 4.5%, 4% and 4% respectively, consistent with Principle 6.4, as if the movements in wages were safety net increases.
141 For expense related allowances, namely the clause 19.4 Meal Allowance, clause 19.6 Carpenter’s Hand Tool Allowance and clause 19.10 Uniforms/Uniform Allowance, the more appropriate rate of adjustment is the Perth movement in the cost of the relevant subgroup, as set out in the ABS CPI March Quarter 2024 Report at Table 9 ‘CPI: Group, Sub-group and Expenditure Class, Index Numbers by Capital City’, for each of the years ending 30 March 2023, 30 March 2024 and 30 March 2025. The relevant subgroups are ‘Meals out and take away foods’, ‘Clothing and footwear’ and ‘Tools and equipment for house and garden’.
142 The adjustments I consider appropriate are set out in the draft clauses in Annexure A to these reasons. The calculations supporting the draft clauses are set out in Annexure B.
Should the 2023 Agreement provide for increases to wages after the nominal expiry date?
143 The parties agree that the 2023 Agreement will have a nominal expiry date of 30 June 2026.
144 Under s 41(5) and (6) of the IR Act, the 2023 Agreement will operate for the term specified, and, notwithstanding the expiry of the term, will continue in force in respect of all parties, except those who retire from it, until a new agreement or an award is made in substitution for it.
145 WASU seeks to ensure that, if the 2023 Agreement is neither terminated nor replaced after the nominal expiry date, that employees receive an inflation linked pay increase from 1 July 2022 and annually on 1 July each year thereafter until the 2023 Agreement is replaced or terminated.
146 The clause proposed is as follows:
Clause 4.2: In the event that:
a) The City of Albany fails to initiate discussions for a new Enterprise Agreement at least six (6) months prior to the nominal expiry date of this Agreement, with a first meeting to occur no later than 31 March 2026; or
b) A replacement Enterprise Agreement has not been agreed within six (6) months of the nominal expiry of this Agreement;
then the pay rates in this Agreement shall be increased on and from 1 July in each year until the Agreement is replaced or terminated. The quantum on the increase shall be equal to the positive movement in Perth CPI between 1 April of the previous year and 31 March of the current year. For the avoidance of doubt, the pay increase that would be applied on 1 July 2026 would be the percentage change in All Groups’ Consumer Price Index for Perth between 1 April 2025 to 30 March 2026.
147 WASU’s justification for the inclusion of this provision is based on, first, it being a longstanding industrial practice. WASU says similar clauses to what it proposes have been included in previous agreements since at least 2011, and that practice should continue. Second, because the clause provides an important safety net for employees if negotiations for or the making of a new agreement is delayed. Third, to incentivise the City to commence bargaining within a reasonable time Finally, because it helps to incentivise and retain staff.
148 The City opposes the inclusion of WASU’s proposed term for several reasons. I will attempt to summarise those reasons briefly, and hope I do not do any injustice to the City’s comprehensive and cogent written and oral submissions by doing so.
149 First, the City says that inclusion of a similar clause created uncertainty and disputation in the past, particularly after the nominal expiry date of the 2019 Agreement. This in turn also had a negative effect on morale at the City, and bargaining for the 2023 Agreement.
150 Second, the proposed clause will have a chilling effect on bargaining.
151 Third, the proposed clause is poorly drafted. Aside from the scheme envisaged by the clause being prone to disputation, the drafting will additionally be a source of disputation.
152 Fourth, the proposed clause is inconsistent with the scheme for making industrial agreements under the IR Act.
153 Finally, the proposed clause creates uncertainty which makes forecasting costs and budgeting difficult for the City.
Past industrial practice
154 Clauses similar to the one WASU proposes for the 2023 Agreement have been agreed in the past. A similar clause was included in the 2013 Agreement. WASU relied on an email from the City’s then manager of Human Resources to employees in December 2013 to show that the wording was drafted by the City to meet WASU and employees’ ‘wish to include a clause that provides an incentive to negotiate a new agreement in a timely and good faith manner’. This was in the context of the preceding 2011 Agreement having an automatic increase post-nominal expiry date, which the City did not include in its offer for a 2013 replacement agreement because ‘this is seen as a disincentive for genuine bargaining by the City’.
155 As I said already, the fact that the parties have agreed to certain provisions in the past is not a persuasive factor in and of itself. That parties agreed something for one agreement does not mean they would not try to improve on it in later agreements.
156 However, if a provision included in a past agreement created difficulties in its operation, that is relevant to whether it should be maintained in the future. I again refer to Western Australian Police Union of Workers and Civil Service Association of Western Australia Inc v Commissioner of Police [2017] WAIRC 00822; (2017) 97 WAIG 1749, where Commissioner Matthews said at [74] – [75] (emphasis added):
74. However, evidence about the operation of a provision over a period of time is relevant and may be instructive.
75. A lack of complaint or disputation about the operation of a provision cannot as a matter of logic lead to the conclusion that some or most or all persons affected are content with the operation of the provision nor can it lead to conclusions that the provision must be fair and reasonable or that it cannot, fairly and reasonably, be improved upon.
157 It is implicit in Commissioner Matthews’ reasoning that evidence that there has been dispute about the operation of a provision is indicative of whether the clause is appropriate.
158 In this case, the operation of a similar provision, namely clause 4.2 of the 2019 Agreement, was the subject of dispute. As Ms Hugo explained, when delays in bargaining for the 2023 Agreement triggered clause 4.2’s requirement to increase wages from 1 July 2022, the City made the decision to pay a 1% increase, while WASU thought the increase should have been 7.6%.
159 WASU commenced proceedings in the Industrial Magistrates Court alleging the City had contravened clause 4.2 and that the CEO was involved in the contravention for the purposes of s 550 of the FW Act.
160 While the Industrial Magistrates Court proceedings were on foot, the City retired from the 2019 Agreement.
161 The effect of retiring from the 2019 Agreement was that the 2019 Agreement terminated, and employee terms and conditions were then governed by state awards. Only the state award entitlements were then enforceable as against the City.
162 Mr Sharpe acknowledged that at the relevant time, employees had interpreted clause 4.2 of the 2019 Agreement in a way such that they considered they were entitled to a 7.6% pay increase on 1 July 2022. He acknowledged that there was a general expectation of an increase of 7.6% and that the dispute was, naturally, divisive for everyone involved. He went on to say that it became a very challenging situation for the organisation, that the work culture and work environment was consumed by the issue, and it was a large distraction from getting on with business. He also said that the issue and its impacts started to spill over into the community as well.
163 On 14 December 2023, Industrial Magistrate O’Donnell delivered reasons for dismissing WASU’s claim that clause 4.2 had been contravened: Australian Municipal, Administrative, Clerical and Services Union v City of Albany, Andrew Sharpe [2023] WAIRC 00958. Her Honour concluded that the City’s interpretation of the clause was correct, and there was no contravention by the City or its CEO, in relation to the payment under cl 4.2. In so finding, her Honour found that clause 4.2 was uncertain. At [52], her Honour said:
The fact that there is on the one hand a defined term in the 2019 Agreement pertaining to an annual CPI figure ‘for the most recent March quarter’, and on the other hand an undefined term which also pertains to an annual CPI figure, but which is used in contexts quite different from those in which the defined term is used, is sufficient to give rise to uncertainty as to the meaning of that undefined term.
164 In the meantime, the negotiations between the parties for a replacement agreement understandably stalled. Without knowing what rate of increase the 2019 Agreement provided, no one knew what they were trading away or gaining in agreeing any particular wage rates.
165 I accept this history weighs against including the proposed term in the 2023 Agreement.
166 Additionally, the proposed clause contains words and phrases which may be ambiguous or inviting of disputation. This intensifies the difficulty WASU faces in pressing for inclusion of the term. For example, what does it mean for the City to ‘initiate discussions for a new Enterprise Agreement’? Is initiating discussions different to initiating bargaining as that term is used in s 42 of the IR Act? Exactly what act or conduct meets this criteria? Must the City make an offer for a new agreement, or is something less required? And what is the intended purpose of the reference to ‘a first meeting’ occurring no later than 31 March 2026? Is it enough for the City to make itself available for such a meeting, must it send an invitation for such a meeting, or must a meeting actually occur? When is a replacement agreement ‘agreed’? When an offer is accepted, when an agreement is signed by all parties, or when some other criteria are reached? Who must reach agreement?
167 These factors weigh heavily against inclusion of the proposed term.
Will the clause incentivise or disincentivise bargaining?
168 The objects of the IR Act, as set out at s 6, include:
(ad) to promote collective bargaining and to establish the primacy of collective agreements over individual agreements; and
(ag) to encourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises within industry and the employees in those enterprises…
169 Further, the Commission must take into consideration the need to encourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises and the employees in those enterprises: s 26(1)(d)(vii).
170 WASU says the clause it proposes advances these purposes while the City says it undermines them.
171 WASU’s position in this regard is somewhat inconsistent. While it says the clause will incentivise bargaining, it also says employees view the clause as a ‘safety net’. The clause can only operate as a ‘safety net’, if the wage increase it provides for is enshrined in a future agreement. In other words, WASU intends to use the clause to limit the scope of future bargaining and not to agree to a replacement agreement unless it contains wage increases that at least meet inflation. In effect, it seeks to agree future wage rates via an earlier round of bargaining.
172 Rather than operate to incentivise bargaining, the clause is apt to be used strategically to establish a floor for future bargaining. That floor is not one that arises from the bargaining itself, but from the previous agreement. In this sense, it is a disincentive to bargaining and particularly, to reaching agreement appropriate to the parties’ needs at the time the agreement is made.
173 There is no suggestion that WASU has not in the past, or will not in future, bargain in good faith. The point is, the proposed clause does nothing to advance or encourage it. It effectively fixes wage rates at a point in time disconnected from the bargaining context.
174 All that needs to happen for the conditions of the proposed term to be met, and a pay rise be triggered, is that WASU serve a log of claims at any point in time before the City does. For instance, if WASU were to serve a log of claim 12 months prior to the nominal expiry date, arguably the City will then be unable to meet the condition in the clause of ‘initiating discussions’. Its failure is not, in that situation, because it is unwilling to initiate discussions, but because it was beaten to it by WASU.
175 If either party withholds agreement for more than six months following the nominal expiry date, that too is a trigger for the pay rise.
176 The disincentivising effect of clauses that operate post the nominal expiry date of an agreement was recognised in Re Mars Australia Pty Ltd [2023] FWC 2402 (Re Mars), which the City referred the Commission to. That case concerned an application by the employer to deal with a bargaining dispute under s 240 of the FW Act, where an impasse in bargaining for a new enterprise agreement had been reached. The enterprise agreement then in operation, and previous collective agreements going back to 1996, contained a mechanism for yearly wage increases based on increases in CPI. The bargaining representatives disagreed as to whether the relevant clause continued to operate or have effect past the agreement’s nominal term. In any event, the employer sought to specifically and clearly limit any future increases to the nominal term of the new agreement.
177 The employer’s arguments in Re Mars were summarised by Deputy President Boyce at [29]:
Mars has raised cogent legal (including enterprise agreement construction) arguments as to why it says that wage increases do not continue automatically and in perpetuity post the expiry of the nominal term of the 2018 Agreement. It also makes the point that wage increases continuing in perpetuity post the expiry of the nominal term of an enterprise agreement are a disincentive to collective bargaining and productivity improvements, in that such perpetuity encourages or facilitates relevant employees to refuse to bargain, engage in surface bargaining, or to otherwise string-out bargaining (because a pay rise will flow to such employees whether or not an existing enterprise agreement (albeit passed its nominal term) is replaced with a new enterprise agreement).
178 Deputy President Boyce agreed. In recommending that the wage increase clause be expressly limited to increases during the nominal term of the new agreement, the Deputy President observed at [38]:
I am inclined to agree with Mars that pay rises ought be limited to the nominal term of the New Agreement. Automatic pay increases continuing infinitum or in perpetuity post the nominal term of an enterprise agreement ultimately gives rise to something other than enterprise bargaining. Whilst parties can agree on almost anything in an enterprise agreement, the notion that pay rises automatically flow post the nominal expiry date of an enterprise agreement, and absent any further negotiations, trade-offs or productivity improvements relevant to and reflective of the current and evolving needs of the enterprise, makes for an unsustainable relationship.
179 The idea that post nominal expiry date wage increases are a disincentive to genuine and productive bargaining is not novel. It is a matter of good industrial sense. The same considerations apply in this case.
180 A related consideration is that what WASU is asking the Commission to do is impose a floor for future bargaining or fix wage increases outside the nominal term of the 2023 Agreement, through s 42G arbitral proceedings. I consider this is inimical to the objects of the IR Act and the scheme of s 42G.
181 The purpose of s 42G is to resolve the parties’ dispute about the instant agreement, that is the dispute that exists between the parties at the time of this arbitration about the 2023 Agreement. It is not appropriate for the Commission to impose a clause on the parties which will change their respective rights and obligations after the nominal expiry date. It is a different thing for parties to themselves agree to limit the scope of future agreements, or to agree to wage increases beyond the nominal term, but for the Commission to do so in the face of s 26(1)(d)(vii) seems a step beyond s 42G’s purpose. It reaches beyond the current dispute about the 2023 Agreement.
Interests of employees concerned: the proposed clause as a ‘safety net’
182 I have said that I see the ‘safety net’ argument as being akin to a limit on the scope of bargaining.
183 Additionally, I am not persuaded that employees’ expectations of, in effect, a guarantee of wage increases linked to inflation, is a good reason for inclusion of the term, because such expectation, if it is held, is unreasonable.
184 As Scott J said in Burswood Resort (Management) Ltd v Australian Liquor, Hospitality & Miscellaneous Workers’ Union, Western Australian Branch [2003] WASCA 102 at [16] and [17], one of the purposes of s 41(6) of the IR Act, which extends the operation of an industrial agreement beyond its nominal expiry date, is to act as a transitional provision governing the parties’ relationship between the expiration of the agreement and the time when a new agreement is made. The effect of s 41(8) is that, when a new agreement is made, the earlier agreement is taken to be cancelled, except to the extent that the new agreement, award or order preserves any of the provisions of the earlier agreement. Parties are not, by making an industrial agreement, tying themselves to its terms on an indefinite basis.
185 The term as proposed is not a guarantee of future wage increases linked to inflation. The 2023 Agreement can be terminated unilaterally once it has passed its nominal expiry date. By s 41(7), at any time after, or not more than 30 days before, the expiry of an industrial agreement, any party to the agreement can file a notice with the Registrar signifying an intention to retire from the agreement at the expiration of 30 days from the date the notice is filed. On the expiration of that time, the party giving notice ceases to be a party to the industrial agreement. If it is terminated, the wage increases provided for in the clause will not take effect, and employees will revert to award wage rates. The agreement is effectively terminated on the giving of notice of intention to retire from it: The Australian Rail, Tram and Bus Industry Union of Employees, Western Australian Branch v Western Australian Government Railways Commission (2000) 80 WAIG 1742 per Fielding SC at 1742 - 1743.
186 If the City wanted to avoid the proposed term being triggered, it could simply retire from the 2023 Agreement. The result would be that the entitlement to pay increases would cease, as would all other entitlements under the Agreement.
187 The proposed clause cannot therefore be characterised as being in the interests of employees concerned. There is a possibility that the clause will induce or encourage tactics in future bargaining that will disadvantage employees.
Interests of employees and employer: attraction and retention of staff
188 It follows from my conclusions that the proposed term is prone to lead to disputation, and is not a guarantee of wage increases in line with inflation, that I do not consider such a term will meaningfully operate to assist in employee recruitment or retention. In any event, there was no evidence before me which would allow me to find it would assist in these objectives anyway.
Interests of the employer: certainty for budget forecasting
189 While I accept that certainty was a compelling consideration for wage increases during the nominal term of the 2023 Agreement, I do not see certainty in this sense as relevant to the question of whether or not the term proposed by WASU should be included in the 2023 Agreement. If, as the City contends, no clause is included, this does not give the City any forward-looking certainty. Wage increases from 1 July 2026 will be a matter for bargaining, and the outcome of bargaining cannot be predicted. The absence of a clause does not promote the City’s desire for certainty.
190 Aside from this point, I otherwise agree with the City that there is no proper justification for making an order that the proposed term be included in the 2023 Agreement. The relevant factors weigh strongly against the making of an order requiring the term WASU seeks.
Disposition and orders
191 In accordance with these reasons, I intend to make an order that the 2023 Industrial Agreement contain the following provisions:
a. At clause 16, for increases in wage rates on 1 July 2023 of 4.5%, 1 July 2024 of 4% and 1 July 2025 of 4%
b. At clause 16, for a one-off top-up payment to Outside Employees representing the difference between the wage increase for 1 July 2023 and $4,000, payable on the first pay date after 30 September 2024 .
c. At clause 19, for wage related allowances to be increased on 1 July 2023 by 4.5%, 1 July 2024 by 4% and 1 July 2025 by 4%.
d. At clause 19, for expense related allowances to be increased on 1 July 2023, 1 July 2024 and 1 July 2025 at rates reflecting the annual rate of change to the expenses.
192 My proposed draft clauses are set out in annexure A to these reasons.
193 I will hear from the parties in relation to the terms of the proposed clauses, consequential orders and the steps now required to ensure the timely registration of the 2023 Agreement.

Annexure A

Terms to be included in the City of Albany Industrial Agreement 2023.
Clause 16
16.1 From 1 July 2022, Employees are entitled to be paid the wage rates set out in the column headed “2022/2023 Current Rates” of the applicable schedules contained in Part H Wages Schedule clauses 52 to 54.
16.2 From 1 July 2023, Employees are entitled to be paid the wage rates set out in the column headed “2023/24 Rates” of the applicable schedules contained in Part H Wages Schedule, such rates being the rates specified in the 2022/2023 Current Rates column plus 4.5%.
16.3 From 1 July 2024, Employees are entitled to be paid the wage rates set out in the column headed “2024/25 Rates” of the applicable schedules contained in Part H Wages Schedule, such rates being the rates specified in the 2023/2024 Rates column plus 4%.
16.4 From 1 July 2025, Employees are entitled to be paid the wage rates set out in the column headed “2025/26 Rates” of the applicable schedules contained in Part H Wages Schedule, such rates being the rates specified in the 2024/2025 Rates column plus 4%.
16.5 In addition to the wage increases set out in clauses 16.1 to 16.2, Outside Employees who were employed full-time from 1 July 2023 to 30 June 2024 are entitled to a one-off payment calculated as the difference, if any, between the gross amount by which the employees’ wages are increased under clause 16.2 and $4,000. The City shall make this payment to each Outside Employee entitled to payment in the next pay period after 30 September 2024.
16.6 In addition to the wage increases set out in clauses 16.1 and 16.2, Outside Employees who were employed part-time in, or who were employed for part only of, the period 1 July 2023 to 30 June 2024 are entitled to the one-off payment provided for in clause 16.5 on a pro-rata basis.
16.7 Wages are to be paid fortnightly by electronic banking.

Clause 19
Clause 19.1
19.1 The allowances contained in clauses 19.3.2, 19.3.3, 19.5 19.7, 19.8.2 and 19.9 of this Agreement shall be increased by:
19.1.2 4.5% with effect from 1 July 2023; and
19.1.2 4% with effect from 1 July 2024; and
19.1.3 4% with effect from 1 July 2025.

Clause 19.4.4
19.4.4 The allowances contained in this clause shall be increased by
19.4.4.1 6.4% with effect from 1 July 2023; and
19.4.4.2 4.6% with effect from 1 July 2024; and
19.4.4.3 The percentage change in the Consumer Price Index, Perth for the period 1 April 2024 to 30 March 2025 for Meals Out and take away foods as published in the Australian Bureau of Statistics Table 9 CPI: Group, Sub-group and Expenditure Class, Index Numbers by Capital City with effect from 1 July 2025.

Clause 19.6.3
19.6.3 The allowances contained in clause 19.61. shall be increased by:
19.6.3.1 3.3% with effect from 1 July 2023; and
19.6.3.2 The percentage change in the Consumer Price Index, Perth for the period 1 April 2024 to 30 March 2025 for Tools and equipment for house and garden as published in the Australian Bureau of Statistics Table 9 CPI: Group, Sub-group and Expenditure Class, Index Numbers by Capital City with effect from 1 July 2025.
Note: No increase is provided on 1 July 2022 because there was no positive change in this expense in the year prior to 1 July 2022 as measured by the ABS CPI: Group, Sub-group and Expenditure Class Index Numbers, Perth.

Clause 19.10.6
19.10.6 The cap on reimbursement of uniform expenses contained in clause 19.10.2 shall be increased by:
19.10.6.1 2.9% with effect from 1 July 2022; and
19.10.6.2 0.9% with effect from 1 July 2023; and
19.10.6.3 The percentage change in the Consumer Price Index, Perth for the period 1 April 2024 to 30 March 2025 for Clothing and footwear as published in the Australian Bureau of Statistics Table 9 CPI: Group, Sub-group and Expenditure Class, Index Numbers by Capital City with effect from 1 July 2025.

Annexure B – Calculations for Expense Related Allowances
Clause 19.4.4 Meals allowance
ABS Table 9 CPI Group, Sub-group and Expenditure Class
Meals out and take away foods
1 July 2023
1 July 2024
March 2023
125.2
March 2024
130.9
March 2022
117.7
March 2023
125.2
125.2 - 117.7 = 7.5
130.9 - 125.2 = 5.7
7.5117.7 × 100 = 6.37
5.7125.2 × 100 = 4.55

Clause 19.6.3 Carpenter’s hand tool allowance
ABS Table 9 CPI Group, Sub-group and Expenditure Class
Tools and equipment for house and garden
1 July 2023
1 July 2024
March 2023
116.5
March 2024
116.1
March 2022
112.8
March 2023
116.5
116.5 - 112.8 = 3.7
No positive change
3.7112.8 × 100 = 3.28


Clause 19.10.6 Uniform allowance
ABS Table 9 CPI Group, Sub-group and Expenditure Class
Clothing and footwear
1 July 2023
1 July 2024
March 2023
103.2
March 2024
104.1
March 2022
100.3
March 2023
103.2
103.2 - 100.3 = 2.9
104.1 -103.2 = 0.9
2.9100.3 × 100 = 2.89
0.9103.2 × 100 = 0.87