Australia: The Manufacturing Sector - Award Modernisation And Collective Bargaining

Modern Manufacturing Award

The Australian Industrial Relations Commission (AIRC) has published the first groups of draft "modernised" awards. These drafts are part of the process to roll the patchwork of Federal awards, Notional Agreements Preserving State Awards (NAPSAs), and industry sector minimum wage orders into the one Federal award applying nationally to all employers subject to the Workplace Relations Act 1996 (Cth). The Fair Work Bill 2008 contemplates that this process will continue under the proposed Fair Work legislation and complete in time for implementation on 1 January 2010.

The Manufacturing Award applies to incorporated employers throughout Australia capable of coverage under the Workplace Relations Act, and unincorporated employers in Victoria and the territories, in respect of employees who fall within the classification in the Manufacturing Award and perform work in a manufacturing or associated industry and occupation.

The definition of "manufacturing or associated industry or occupation" is extensive and has few practical exceptions in the five vocational fields recognised within the classification structure of the Manufacturing Award – namely, trade, technical, engineering/production, supervisor/trainer/coordinator, and professional employee.

However, the Manufacturing Award has the following specific exclusions:

  • plumbers, unless employed in establishments covered by the Manufacturing Award, and therefore the plumbing is ancillary to manufacturing;
  • the sugar industry – unless the work is carried out by contractors covered by the Manufacturing Award but otherwise performing work in mills, terminals, refineries and industry research organisations related to the sugar industry;
  • security personnel;
  • gardeners;
  • cleaners – unless the cleaning work is incidental to the performance of other work covered by the Manufacturing Award, or the employee is employed most of the time in cleaning work in factories covered by this award, but not including contract cleaning companies;
  • work carried out by employees of a Rail Transport Operator or on-site with train rolling stock in the building and construction industry;
  • work carried out in the power industry, telecommunications industry or on-site in the building and construction industry in relation to the making, installation and maintenance of transmission cables.

Important Features

Given the abundance of applicable NAPSAs in this industry in various states, the impact of the Manufacturing Award needs to be considered on a state-by-state basis in relation to the Federal Award or NAPSA that applies to your business. A full list of the Federal awards and NAPSAs that are overridden by the Manufacturing Award can be found at Attachment B to the Award Modernisation decision of the Full Bench of the Australian Industrial Relations Commission handed down on 20 June 2008 (Award Modernisation (AM2008/1) [2008] AIRCFB 550).

In terms of the key Federal awards, which are also common rule awards in Victoria, the Manufacturing Award effectively replaces the following awards as relevant to the applicable industry:

  • in the general metal manufacturing industry – the Metal, Engineering and Associated Industries Award 1998 and the Metal, Engineering and Associated Industries (Professional Engineers and Scientists) Award 1998;
  • in the glue and other adhesives manufacturing industry – the Adhesives Industry and Gelatine Manufacturing Award 2001;
  • in the cable making industry – the Rubber, Plastic and Cable Making Industry - General - Award 1998 and the Rubber, Plastic and Cable Making Industry - Technical and Supervisory Award 2000;
  • in the vehicles and vehicle parts manufacturing industry – the Vehicle Industry Award 2000.

The substantive terms of the Manufacturing Award are consistent with, and in some cases identical to, the substantive provisions of the Metal, Engineering and Associated Industries Award 1998. A comparison of key issues as against these awards indicates the following significant matters that should be taken into account by employers in these industries as being different from the predominantly applying awards:

  • the Manufacturing Award incorporates the National Employment Standards (NES), set to also come into force on 1 January 2010 – this means that annual leave, personal (sick and carer's) leave, community service leave, public holidays, notice of termination, severance pay on termination on the ground of redundancy, and parental leave are all reverted to the NES and no longer detailed in the Manufacturing Award itself. Some facilitative and transitional provisions dealing with the above entitlements remain or have been introduced, for example, under the NES, leave is paid at the base rate of pay, whereas the Manufacturing Award retains the original calculation of pay for employees – that is, "wages to be paid must be worked out on the basis of what the employee would have been paid ... for working ordinary hours during the period of annual leave, including allowances, loadings and penalties paid for all purposes of the award, first aid allowance and any other wages payable under the employee's contract of employment including any overaward payment". However, most matters are left to be dealt with by the NES without modification;
  • the Manufacturing Award contains a facilitative provision which allows certain terms to be amended in how they operate in respect to an individual employee who agrees, to a majority of employees if they agree, or to the workplace if there is majority agreement. The terms that can be amended depend on whether the agreement will apply to an individual or the workplace. However, unlike arrangements agreed to under a separate collective agreement which are binding for the life of the agreement (note that AWAs are no longer possible, and ITEAs will not be renewed under the Fair Work legislation), arrangements made under a facilitative provision of a modern award must place the employee in a position such that the employee is better off overall, and can be terminable on either party giving 28 days notice, or sooner if otherwise agreed in writing by the parties – so there is no certainty to such an arrangement;
  • the Manufacturing Award sets out a specific consultative mechanism, which is far more strict than the consultative provision under the current Federal Awards, and thus more in line with many of the current applicable NAPSAs. It contains an obligation to consult with employees and their representatives on any "definite decision to introduce major changes in production, program, organisation, structure or technology". What constitutes a major change ranges from possible retrenchments to possible changes in working hours;
  • a new classification structure has been created that equates all the various levels of employees under the various Federal Awards and NAPSAs and creates a parity as defined by Level C1 (most senior) through to Level C14 (least senior) with Supervisors / Trainers / Coordinators included at level C2(a). These classifications are largely a replication of the NAPSA preserving the NSW metals award, but the various Federal Awards and state NAPSAs have equivalent classifications and can translate into this classification structure. Where the difference arises is that many of the awards and NAPSAs do not have a classification structure that reaches to the levels of seniority that the Manufacturing Award proposes to, particularly in respect of the C2(a) classification. Accordingly, where some moderately senior employees might previously have been "award free" due to the limits of the classification structure of the underlying award or NAPSA, now those employees may fall within the coverage of the Manufacturing Award and be entitled to its provisions.

Significance in Collective Bargaining

So why should you care about the Manufacturing Award and the differences outlined above as compared to the current industrial reality? The Manufacturing Award will form the basis of the minimum conditions of employment for every employee within its scope, and thereby oblige every employer of such an employee to comply with its terms in respect of that employee. As a result, the Manufacturing Award also becomes the base level for collective agreement making, and in particular the BOOT.

The pay rates for employees in the classifications in the Manufacturing Award range from $28.42 per hour ($56,157.92 p.a.) for the most senior, to $14.31 per hour ($28,276.56 p.a.) for the least senior, with phasing-in rates as qualifications are gained. These pay rates are currently the same as or within $0.01 of the pay rates for the relevant Federal Awards set out above and the NAPSAs preserving the various equivalent state awards in NSW, Tasmania, South Australia and Western Australia.

However, although the pay rates will apparently not significantly change as a result of the introduction of the Manufacturing Award, employees who had previously been "award free" might now plausibly fit within the scope of the Manufacturing Award and be entitled to collectively bargain. Further, the BOOT requires not just that employees be at no disadvantage against the Manufacturing Award, but that those employees be "better off" than if they were engaged under the Manufacturing Award – that is, not just a matching of terms, but an improvement in terms overall that cannot necessarily be offset in a reduction of terms elsewhere.

It is also of note that the Work Choices concept of "prohibited content" will be scrapped under the Fair Work legislation, and there will only be a prohibition on unlawful terms and discriminatory terms in new collective agreements – effectively terms that modify the unfair dismissal or union right of entry provisions of the Fair Work legislation, or terms that discriminate or have the effect of discriminating on the basis of a protected ground. This means that unions can enter the bargaining process where they have a right of representation and will be able to negotiate for union membership fees to be deducted from pay, union involvement and representation in all levels of dispute resolution, prohibitions on casual employees, limits on numbers of part-time employees, training only through union-run training courses, and so on.

While the Fair Work legislation carries no transitional provisions at this time to explain how pre-Fair Work agreements will be treated under the new legislation, it seems likely that it will be easier to negotiate a collective agreement now that does not include prohibited content of the kind outlined above, and which will more easily satisfy the test for approval by the Workplace Authority, and will be in relation to an industrial instrument with which employers are more familiar.


Modern awards are directed at having common minimum terms of employment across an entire sector of the workforce, thus making it easier to measure compliance and effect the approval of collective agreements. In doing so, the AIRC has attempted to fulfil its mandate that no employee would suffer a detriment, and no employer would be unfairly burdened. This has proven a difficult mandate to live up to, particularly in light of the fairly dramatic changes that will be imposed by the Fair Work legislation – noticeably the removal of AWAs and ITEAs, the inclusion of model facilitative provisions and the repeal of prohibited content provisions.

What is clear from this draft, however, is that the Manufacturing Award proposes to change a number of terms, particularly in relation to the breadth of the coverage by having a classification structure that includes relatively senior employees, and the incorporation of the NES. In some instances, this will serve an employer's interests. However, for those employers who are not convinced that the Manufacturing Award offers a more attractive position than their current industrial arrangements, then consideration should be given now as to whether it is worth investing in the creation of a new collective agreement under Work Choices.

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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