Australia: Awards as a ´Safety Net´: Undermined by The Federal Court

Last Updated: 10 June 2004
Article by Anthony Wood

The Federal Court has recently upheld the insertion of redundancy provisions in a public sector award which reflected the current entitlements of the employees under the relevant certified agreement. In doing so, the Court left open the very real possibility for awards to be varied above what might commonly have previously been understood to be 'a safety net of minimum wages and conditions of employment'.

The case before the Federal Court was remitted from the High Court of Australia and involved an application by two public sector authorities (the Australian Sports Drug Agency and the Australian Fisheries Management Authority) challenging a Full Bench decision of the Australian Industrial Relations Commission (Commission) which inserted redundancy provisions into two federal awards covering the authorities. The redundancy provisions were the same as those which applied under the certified agreements binding on the authorities. Those certified agreements provided for redundancy pay of two weeks for each year of service with a minimum of four weeks and a maximum of 48 weeks pay. This was opposed by the employers who argued that awards should reflect the minimum award standards as established in the 1984 Termination, Change and Redundancy test case (TCR).1

In reply, the Community and Public Sector Union (CPSU) argued that the existing redundancy provisions in the public sector certified agreements (which were subsequently inserted into the award) had applied for up to 14 years and were consistent with those applying elsewhere in Australian government employment. Accordingly, the CPSU asserted that the true safety net with respect to redundancy pay was reflected in the current agreements.

In considering the application, the Federal Court was required to consider the arbitral powers and functions of the Commission which are relevantly set out in section 88B of the Workplace Relations Act (Act). They also considered the statutory context by considering the principal objects in section 3 of the Act. For example, section 3(d) provides that the Commission is to ensure 'the maintenance of an effective award safety net of fair and enforceable minimum wages and conditions of employment'.

What constitutes a 'safety net'?

Perhaps of most interest was the Court's conclusion that the Act does not involve the Commission assessing the relevant minimum standard in the context of standards prevailing in the community generally. Instead, the Court concluded that the Act requires the Commission to take into account a range of considerations in assessing what amounts to the safety net. In that context 'fairness' was a central consideration and this could be determined by reference not only to other award conditions, but by historical reference to the applicable award or agreement provisions which apply to the employer. The Court held that this involved the exercise of a wide discretion.

Implications for employers

  • This is the first decision of a Full Court of the Federal Court which widens the commonly understood role of what constitutes a 'safety net' for award provisions.
  • Contrary to popular belief, the 'safety net' is not one simple set of standards which automatically translates across all types of work and to all employers. Applying this logic, the same type of work performed by two different employees in separate enterprises could have quite different minimum award rates of pay or conditions.
  • By emphasising the role of 'fairness', the Court's decision empowers the Commission in future matters to take into account a broad range of factors specific to a particular business rather than simply adopting a 'one size fits all approach to award conditions'.
  • What constitutes the award safety net can be important for a number of reasons. Although actual rates of pay and conditions typically exceed award minima, the safety net is still important in areas such as assessing the application of the no disadvantage test in respect of certified agreements or AWAs.
  • There is still some question as to whether the Federal Court's decision itself will be appealed.

Clients with any queries regarding the decision and its implications should contact one of the Freehills ER partners.


1. The TCR standard was recently revisited by a Full Bench of the Commission in the Redundancy Case (March 2004 — see article also in this edition of the Freehills newsletter). Nevertheless, the severance pay awarded by the Commission in the March test case was still significantly less than that inserted by the Commission into the awards covering the two authorities which were under appeal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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