C2002/3172, Transcript of Proceedings [2002] AIRCTrans 2648 (12 July 2002)

AUSCRIPT PTY LTD
ABN 76 082 664 220

Level 4, 179 Queen St MELBOURNE Vic 3000
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TRANSCRIPT OF PROCEEDINGS


O/N VT04694
AUSTRALIAN INDUSTRIAL

RELATIONS COMMISSION

COMMISSIONER GAY

C2002/3172

THE POLICE ASSOCIATION

and

THE CHIEF COMMISSIONER OF POLICE

Application under section 170LW of the Act
for settlement of dispute re adjustment of
expense related allowances specified in
clause 5.1.3.2 of the Victoria Police Force
Certified Agreement 2001

MELBOURNE

11.56 AM, THURSDAY, 27 JUNE 2002

PN1

MR C. KENNEDY: I appear for the Police Association and as agent for Paul Mullett and with me appears MR G. KENT and MS E. RILI.

PN2

MR R. WATSON: I appear for the Chief Commissioner of Police and with me is MS K. MURDOCH.

PN3

THE COMMISSIONER: I indicate for the record that there has been a conference in this matter prior to getting underway today and that previously the matter has been in discussion and we are going to hear from you, Mr Kennedy.

PN4

MR KENNEDY: Thank you, Commissioner. This matter comes before the Commission today by way of a dispute notification by the Police Association dated 24 June 2002. It is a dispute notified under section 170LW of the Workplace Relations Act, Commissioner. The subject matter of the dispute is the adjustment of expense related allowances specified in clause 5.1.3.2 of the Victoria Police Force Certified Agreement. The certified agreement, Commissioner, provides at 5.1.3.1 - and I assume the Commission has a copy of the agreement.

PN5

THE COMMISSIONER: Yes, although - - -

PN6

MR KENNEDY: I do have a copy bound as part of an exhibit that I will table subsequently, if that would assist the Commission?

PN7

THE COMMISSIONER: I have noticed that everyone has quite a jazzy document - can you hold it up - and I am feeling a bit left out not having one of those so I do want one of those.

PN8

MR KENNEDY: Well, that is not the exhibit.

PN9

THE COMMISSIONER: Isn't it?

PN10

MR KENNEDY: I will table an exhibit, Commissioner. That just happens to be my personal copy of the agreement.

PN11

THE COMMISSIONER: Well, I have got the agreement naturally and it is here in this big binder but I am keen to get one of these as well.

PN12

MR KENNEDY: Then it might be easier if you have got it as a neat separate document.

EXHIBIT #KENNEDY1 COPY OF AGREEMENT

PN13

MR KENNEDY: Just for convenience, Commissioner, the first tab of this agreement is actually a copy of the certified agreement that is in place, Commissioner, and 5.1.3 can be found starting at the bottom of page 33 of the agreement, that is the first tab, and the agreement provides, Commissioner, there at .1 that the rates of expense related allowances referred to in clause 5.1.3.2:

PN14

...shall be increased on 1 July each year to reflect increased costs with the first adjustment to take place on 1 July 2002.

PN15

And .2, which is on the next at the top of page 34, Commissioner, lists a range of expense related allowances that are contained within the agreement and, of course, were previously contained in the antecedent Police Officers Award of the Victorian State Commission. The dispute that arises and is before the Commission now is one between the parties about how to give effect to that particular provision and in particular what the amount of the adjustment of those allowances should be and the relevant basis on which those allowances should be adjusted.

PN16

Now there is a number of approaches the Commission can take to addressing this particular question, Commissioner, and the first has its origins in the protracted disputation and in negotiations that took place prior to the making and leading up to the making of this agreement, Commissioner, and that is one approach that may commend itself to the Commission, is to try and ascertain whether the parties at the time of reaching the agreement had already determined what the adjustments would be.

PN17

THE COMMISSIONER: Did you say try and - it was try and something. I didn't quite hear the - - -

PN18

MR KENNEDY: Sorry, that the Commission could try and determine whether the - - -

PN19

THE COMMISSIONER: Determine, yes, thank you.

PN20

MR KENNEDY: Whether the parties at the time of reaching agreement had already determined what the adjustments would be, either because of a longstanding practice or because of specific undertakings during the negotiation of the agreement. That is, the Commission can embark on a forensic exercise, if you like, Commissioner, of troweling back through the negotiations and the - - -

PN21

THE COMMISSIONER: That can sound very attractive, Mr Kennedy.

PN22

MR KENNEDY: No, it may well be a worthwile exercise, Commissioner.

PN23

THE COMMISSIONER: Yes.

PN24

MR KENNEDY: But we can go back and look at the correspondence that was exchanged between the parties leading up to the making of the agreement, look at the heads of agreement that was struck between the parties that is the antecedent document to the certified agreement and from that try and give meaning to those words, Commissioner; an exercise in interpreting an agreement or award of the Commission, if you like.

PN25

THE COMMISSIONER: That is at 5.1.3.1?

PN26

MR KENNEDY: Yes.

PN27

THE COMMISSIONER: To give meaning to them.

PN28

MR KENNEDY: Yes.

PN29

THE COMMISSIONER: Do you think they lack meaning, is that - would be part of your submission? I know you are just developing your submission.

PN30

MR KENNEDY: Well, I think an alternative - when someone says they lack meaning, I mean it has been a principle of this Commission that effectively when the parties come here in disputation about what a thing means that the Commission can look back at the history of that particular provision to try and give colour to those words, Commissioner. Now I am not necessarily standing before you saying that we believe that that is a preferred approach to the Commission. At this point I am merely saying it is one of the options available to the Commission.

PN31

THE COMMISSIONER: Yes.

PN32

MR KENNEDY: The second option that is available to the Commission is to treat those words as having their natural meaning, and that is to put aside the baggage of the negotiations and proceed to determine the matter having regard to the ordinary practices and principles of the Commission and I guess the third option that is available to the Commission is actually a composite of the two and that is to the extent that you can forensically determine some scope of agreement on what the adjustment should have been, that there was at some point leading up to this, a clear understanding between the parties that certain allowances would be adjusted in a certain way, then given it is an agreement the Commission should give effect to where you can ascertain agreement and if there are parts where the Commission is of a view that you can't ascertain what agreement was reached or whether agreement was reached on other parts then the Commission should apply the ordinary principles of the Commission in the adjustment of expense related allowances and I will come to a technical submission on what the powers are of the Commission subsequently to developing these ideas, Commissioner.

PN33

But what I want to take the Commission down the path here is going through what I believe the evidence are for each of the first two options that I have outlined to the Commission so far and in saying that it is my intention to give an overview of what the Association believes is the position. We understand the employer is not in a position to respond today to our submissions and the parties have been having further discussions in the lead up to this and will probably continue to have further discussions after this so I am really flagging to the Commission that we may wish to come back after today's proceedings and before the employer commences to respond, with some further material and detail in respect to these matters, Commissioner.

PN34

THE COMMISSIONER: Yes.

PN35

MR KENNEDY: In respect to option one which is the forensic exercise, Commissioner, as I have said - look, the agreement that was finally certified was reached after protracted negotiations, lengthy conciliation in this Commission and the intervention of third parties to mediate the process out of the Commission so there is - the agreement represents the culmination of those negotiations and along the way obviously there were accommodations and understandings reached between the parties and clearly the words of the agreement have been crafted to reflect what the parties thought were the common understandings, Commissioner.

PN36

Now what is clear from the agreement is that the parties have reached agreement that the rates should be adjusted and they should be adjusted each year on 1 July and the first year of adjustment should be July 2002. What we don't have on the faith of the record, Commissioner, is how much the adjustment should be and what the basis of the adjustment should be. Now we would say that it is open to the Commission to conclude that there was agreement reached on the adjustment of those rates, Commissioner, and what those adjustments should be and it is my intention to take you briefly through the exhibit marked KENNEDY1 to show to the Commission that we believe there was agreement reached on how this amtter was to be dealt with between the parties.

PN37

We have already taken you to the first tab which is the words of the actual agreement. The second document I have included in exhibit KENNEDY1, Commissioner, is the heads of agreement struck between the Chief Commissioner of Police and the Police Association that represented the commitments that gave rise to the settlement of the dispute. If you like, Commissioner, this is the document that was forged in the heat of the battle. Now what that agreement provides at page 5 of that heads of agreement, Commissioner, at 5.16, is a commitment to:

PN38

...increase meal, accommodation and transfer allowances, being increases in the amount agreed between the parties by separate award-related processes no earlier than 1 July 2002.

PN39

And whilst in 20/20 hindsight we can say that the drafting may have lacked some precision, I believe that there is two issues can be drawn out of that. One is the notion that there was an amount agreed for the adjustment of the expense related allowances listed, Commissioner, and the separate provision is that underlying all that and embedded in the words of a separate award-related process is that the ordinary principles of the Commission in relation to the adjustment of expense related allowances are the underpinning principle to that agreement, if you like, Commissioner.

PN40

I would now take the Commission through a number of documents that are contained in KENNEDY1, Commissioner, and I will skate over those, Commissioner, briefly. The first one is the one marked tab 3. Now this is a document that was prepared by the Police Association during the period of negotiations, Commissioner, and it sets out the allowances to be adjusted, what their existing rates were, what component of CPI the Association put to the employer should be the basis of adjustment and then what the new rates would be if we went to March 2001.

PN41

I would say in respect of this document, Commissioner, interestingly enough, this was tabled during negotiations in June as I said. The terms of the percentage increase is in the right-hand column. It was subsequent to the tabling of this document in fact that the employer identified that the percentages contained in the right-hand column was wrong and that was a mathematical error and that the correct percentage CPI change from 1992 to March 2001 was in fact 23.3 per cent and possibly during the course of these proceedings you might hear 23.3 per cent more than once, Commissioner.

PN42

But that is the document that set the ball rolling and there is, during the course of negotiations, no other comprehensive document like that that sets out the individual allowances and what they should be, Commissioner. So whilst that document is flawed in terms of it miscalculated what the allowances should be, it is actually the only comprehensive setting. As I said susbequently the employer identified that the CPI had been calculated wrongly, came back with 23.3 per cent as the adjustment and it is our submission that that was the basis on which the parties continued then to operate throughout that process.

PN43

I will pause it one moment because the issue that is notable in that, Commissioner, on page 3 of tab 3 at the very bottom is the question of housing prices. The one that relates to the old paragraph 81 of the Police Officers Award and in that, Commissioner, it is no longer CPI being used as the component for adjustment. What is flagged there as the basis for adjustment is Real Estate Institute of Victoria median house price, Commissioner. So the Association effectively put a claim that was to adjust all of the expense related allowances for CPI all groups national, apart from housing, and that housing should be adjusted having regard to the median house price for Melbourne, Commissioner.

PN44

If I take you briefly to tab 6 in that exhibit, Commissioner, which is an e-mail from the employer to the Police Association. This actually goes to my point that when the Association put its original document, we calculated the CPI wrongly and in fact this was an employer's note back to the Association and whilst the e-mail is dated 9 January 2002 the actual date of that document is 8.11.2001. If you go down to house price figures, to the second dot point, Commissioner, you will see in parenthesis it says, "September quarter not available as at 8.11.01.

PN45

THE COMMISSIONER: Yes.

PN46

MR KENNEDY: So the only purpose of that document is to reinforce the issue about the error in the calculation. Now documents 4 and 5 relate to an exchange of correspondence between the parties during negotiations about the costs of certain claims and as the Commission is aware from its personal experience there was protracted negotiation about the costs, the actual cost impact of certain parts of the Association's claim and that took place in the context of a government's position that they only wished to pay $123.5 million in the third year of the agreement so there was much debate about, well, if we adjust expense related allowances what does it cost in the third year of the agreement and how much could then be put into wages or whatever.

PN47

Now the first one at tab 4, Commissioner, is a letter from the Association to the Chief Commissioner dated 1 October 2001 which was about revising the employer's estimates of cost and if I take you, Commissioner, to attachment B of that letter which is the fifth page. Attachment B, it is headed at the top, Cost of CPI Adjustment to Clothing Allowances. It sets out the current amount that the employer was spending on clothing and then it talks about the first CPI adjustment 23.3 per cent less percentage movement in aggregate wages bill 4.5 per cent.

PN48

And that arose the issue that when the employer constructed their model of on-costs, Commissioner, some expense related allowances were embedded in the on-costs and therefore in terms of the aggregate wage movement was funding the adjustment of those allowances. So if aggregate wage movement was 18.7 per cent in the first three years of the agreement or the first year of the agreement then that was already embedded in the 123.3 million, Commissioner, so it didn't - - -

PN49

THE COMMISSIONER: So one had to be discounted to avoid double-dipping?

PN50

MR KENNEDY: Yes, yes. So I guess two issues come out of that particular document in that it talks about 23.3 per cent as being the first adjustment which is the CPI all groups national figure that I referred to earlier and the second issue that comes out of that document, Commissioner, is a provision for the parties to adjust those allowances during the life of the agreement by 3 per cent per annum. Obviously we couldn't have known what the CPI would be for each year and so the parties, for the purpose of costing, made an estimate that says 3 per cent per annum.

PN51

if we go to tab 5, Commissioner, tab 5 is an undated response from the Chief Commissioner of Police but was contemporaneous with our letter of 1 October which is tab 4. If you go to the second page of that letter, Commissioner, if we go down to "plain clothes and uniform" and "removal costs, meals etcetera", which are the bottom three in that, in the third column, TPA revised estimate, the figures set out in those three cells, Commissioner, are the ones that are contained in tab 4, our calculations, and then Vic Police position 2.10.01 are again those rates that were contained in our letter.

PN52

So what they represent is an agreement by Victoria Police to the methodology used by the Association to calculate the costs of those adjustments. Now we would say to the Commission that what that evinces is an agreement by Victoria Police that those allowances would be adjusted by 23.3 per cent up front and then 3 per cent per annum during the life of the agreement. Now in essence, Commissioner, that is the outline of the submission by way of doing the forensic exercise to try and determine what was agreed and that attempts to give some meaning to the words in the heads of agreement "to be increased by the agreed amounts", all right, that are contained in the heads of agreement.

PN53

Now I will come in later submissions, Commissioner, if required, to the question about - there is a difference in the wording between the heads of agreement and what is the final certified agreement before the Commission. The heads of agreement use one set of words, says that the "agreed amounts done by separate award-related process". They are not the words that appear in the actual agreement, Commissioner, and that is an issue we may wish to take issue with further on about whether there was a shift in what the parties believed the agreement was between the heads of agreement and the actual certification of the agreement.

PN54

But for the purposes of my first submission I am saying there was an agreement between the parties and that agreement was 23.3 per cent plus 3 per cent plus 3 per cent during the life of the agreement and median house prices would be the basis of adjustment per document at tab 3. The second approach that I said could commend itself to the Commission is that if the Commission can't construct some notion of agreement from the background document then it is open to the Commission to apply its ordinary principles, that is, it should give natural meaning to the clause in the certified agreement and that is they will be adjusted to reflect increases in expense, first adjustment 1 July 2002.

PN55

Which leads us down the path of identifying what are the increases in expense for the relevant allowances, Commissioner. Now the historical practice of this Commission has been to have regard to the relevant movements in the Consumer Price Index as published by the Australian Bureau of Statistics and the onus has been on a party seeking some departure from that as a method of adjustment to make out a case as to why those indices are not the appropriate method of adjustment, Commissioner, and I might foreshadow I might have a bet each way as I go on this question, Commissioner, about the appropriateness of the ABS but just for the purposes of going through this issue, Commissioner, I will deal with the allowances in convenient groups that relate to how the ABS sub-groups of CPI stack up.

PN56

So I will deal with meals as one lot and I won't break it up into overtime meals, meals related to accommodation, etcetera, I will just deal with meals and talk about those as one lot, I will talk about mileage rates as one lot, I will talk about housing as one lot and I will talk about clothing as one lot, which all represent different indices that could be used by the Commission. The first one we would go to, Commissioner, is meals and I do have an exhibit in relation to meals.

EXHIBIT #KENNEDY2 ALLOWANCES RELATED TO MEALS

PN57

MR KENNEDY: Now this exhibit, Commissioner, contains really four documents within the two tabs, Commissioner. The first document is the Police Service Board reasons for Determination 467. It relates to an application by the Police Association to vary the various meal related allowances. In the old Police Service Board determination - and I haven't provided each determination along the way to the last time they were adjusted in 1992, Commissioner, I have provided this determination because it is the one that actually elucidates the rationale used by the Board to fix meal rates within the award - and if you go to the second page of that determination, Commissioner, at the second paragraph it goes on:

PN58

The increases which are sought arise from similar increases which were granted by the Victorian Public Service Board in determinations which apply to the Public Service in September 1986 ...(reads)... meal and accommodation costs undertaken by that Board.

[12.23pm]

PN59

And the next paragraph, the Victorian Public Service Board determinations cover personal expenses of a certain type, Commissioner. So the historical basis of varying these allowances, Commissioner, had been by a survey conducted by the old Public Service Board which no longer exists, Commissioner. So we are not able to say, well, what is the Public Service Board determining today as being the appropriate rates that should apply to police.

PN60

So there has been - the nexus between the historical basis of adjusting these allowances and modern times has been broken because of various changes in the industrial landscape, Commissioner, but what we do have is existing allowances set out in the agreement. Now the historical basis that the Commission has used to alter allowances such as these, meal allowances and overtime meal allowances, Commissioner, has been CPI and in particular the meals out and take away food sub-group of CPI, Commissioner, and tab 2 of KENNEDY2 contains the relevant print from 1992 of the index numbers that relate and the relevant print from 2002, the March 2002 quarter of the same sub-group, Commissioner, and for convenience the one that is actually attached to the tab is the calculation converting those index numbers into a percentage increase, Commissioner.

PN61

So if the Commission was to apply its ordinary principles to the adjustment of an existing expense related allowance to reflect increased costs then the Commission should adjust these relevant allowances by 33.8 per cent, Commissioner, and that would bring them up to current expense and if needs be, Commissioner, I would flag that if there is a requirement for further argument then I am in a position where I can provide authorities that demonstrate the historical practice of this Commission in relation to those types of allowances but at this point of time I think it is of common knowledge and doesn't require me to go through any authorites, Commissioner.

PN62

THE COMMISSIONER: Yes.

PN63

MR KENNEDY: The second group of allowances, Commissioner, relate to the use of private motor vehicles and I have an exhibit.

EXHIBIT #KENNEDY3 ALLOWANCES RE USE OF PRIVATE MOTOR VEHICLES

PN64

MR KENNEDY: This takes the form the same as the previous exhibit, Commissioner. That is it shows the last determination of the Police Service Board that would go to the rationale for the original fixation of the rates and adjustment of the rates and again it relied upon what is called largely on a formula recommended by the distance rates conference that is embedded in paragraph 2 of the reasons for determination, Commissioner. So it says:

PN65

The determination of the Public Service Board indicates that the rates in the determination for the Victorian Public Service are based largely on a formula recommended by the distance rates conference. The formula provides a uniform rate according to vehicle class, irrespective of distance travelled on official business, and the Public Service Board has added to this formula components relating to garaging and hiring.

PN66

And it talks about, in the fourth paragraph:

PN67

It has been the practice of the Police Service Board to adopt the distance rates scales determined by the Public Service Board.

PN68

Again they consider it appropriate. Again, similar to meals, Commissioner, the change in industrial landscape has meant that there is no distance rates conference in existence. The public - - -

PN69

THE COMMISSIONER: Was that a group of worthies who - was there a - - -

PN70

MR KENNEDY: Yes, there was a group of worthies, Commissioner.

PN71

THE COMMISSIONER: I don't mean that in a disparaging way but the Americans use the word "conference" in a different meaning. It means an association. Was that referring to an actual conference?

PN72

MR KENNEDY: Yes, Commissioner, and - well, but no longer exists.

PN73

THE COMMISSIONER: They are not conferring any more?

PN74

MR KENNEDY: The Public - yes, and the Public Service Board. The fixing of wages and rates etcetera has been devolved to the individual departments and - - -

PN75

THE COMMISSIONER: Yes.

PN76

MR KENNEDY: As it is constructed in Victoria, Commissioner, and so there is no longer a role for a central industrial relations function as used to be performed by the Public Service Board, Commissioner, in fixing those rates.

PN77

THE COMMISSIONER: Yes.

PN78

MR KENNEDY: So we would say again, the nexus between the Public Service Board and its methods of adjustment have been lost and what we are left with is the rates that exist and now we need to look for how we move them in the absence of the conference of worthies that could have given us some guidance, Commissioner, and again we would say that the appropriate method that could be used by the Commission is again CPI, Commissioner. That private motoring constitutes a sub-group at CPI and tab 2 again contains the relevant prints from 1992 and March 2002 and the front page with the tab 2 on sets out the percentage change.

PN79

In this case it would be 23.2 per cent, Commissioner, would bring those particular rates up-to-date in the agreement. The third grouping if you like, Commissioner, are the housing related reimbursements contained within the agreement, Commissioner, and these deal with transfer expenses, the payment of stamp duty on a house on purchase, the payment of mortgage establishment fees, etcetera, Commissioner, that are associated with it and I have another exhibit, Commissioner.

EXHIBIT #KENNEDY4 HOUSING RELATED REIMBURSEMENTS

PN80

MR KENNEDY: I might say, Commissioner, as we progress to the basis of some of these it grows murkier, Commissioner, but again this is in the same format. What it sets out is the last Police Service Board determinations that give you some insight into how they were making their adjustments and then what we believe are the relevant indices that the Commission can apply to determine these. The first tab, Commissioner, and I won't go through them one by one, is the historical decisions that relate to adjusting these allowances, Commissioner, and once again it was the Commission, the policy of the Police Service Board to adopt the rates that the Public Service Board determined to be appropriate.

PN81

This might be marginally inconvenient, Commissioner, but if you go to tab 2 and count back four pages - I am sorry - - -

PN82

THE COMMISSIONER: Yes.

PN83

MR KENNEDY: Which is the reasons for determination number 538, so it will be dated 23 October 1991, will be the head sheet.

PN84

THE COMMISSIONER: Yes.

PN85

MR KENNEDY: If we go over the page for the actual reasons, again in the second paragraph it says:

PN86

The claim is made consequent upon increases made by the Public Service Board effective from 12 May 1991. By practice these kinds of increases have been adopted by this Board.

PN87

This is one, Commissioner, where I cannot find reference to a conference of worthies that were fixing these rates, Commissioner, but the rates were last fixed in 1992, Commissioner, and they were set at a rate of - the cap for reimbursement for buying and selling was set at a rate of $170,385, Commissioner. I, to date, have been unable to ascertain how the Public Service Board came to that rate. So at tab 2, if you go to the document that is upside down, Commissioner - - -

PN88

THE COMMISSIONER: Yes.

PN89

MR KENNEDY: What that is is a print of median house prices back in 1992 and actually some subsequent years from the Real Estate Institute of Victoria. The problem we have here is that the rates being paid by the Public Service Board significantly exceed what was the median house price in Melbourne at that time and I am not in a position to inform the Commission as to why there appears to be a loading on median house prices if you like, Commissioner. I have gone to some efforts to try and find the Public Service Board determination that fixed the 170,385 but I haven't been able to lay my hands on a copy to date, Commissioner.

PN90

But suffice to say again that the Public Service Board no longer exists, there was a rate fixed and the Commission needs to make some determination as to what should be the appropriate rate to put in place as the cap for reimbursement and in fixing that rate, Commissioner, we think you should have regard to median house price which is - tab 3 sets out the median house price for Melbourne at 316,000 and if I can elucidate the reasons at a later date as to why the Public Service Board fixed a rate higher than the median house price when it last fixed a rate then certainly I would inform the Commission.

PN91

But I would say that our claim on the employer did say the median house price for Melbourne, Commissioner. So we would say the appropriate rate to go in the award there is 316,000 which is the current price and it should be adjusted in the future in line with median house prices, Commissioner. Now the last group of allowances, Commsisioner, are those that relate to clothing, that is the uniform maintenance and upkeep allowance and the plain clothes allowance for members required to perform duty in plain clothes and this is the last exhibit, Commissioner.

EXHIBIT #KENNEDY5 ALLOWANCES RELATED TO CLOTHING

PN92

MR KENNEDY: Now there are two documents contained within this exhibit, Commissioner. The first is a determination by the Police Service Board when dealing with the question of how this allowance should be adjusted and the second document represents a basket of clothing, Commissioner, that reflects how the Board adjusted those allowances and updated it for changes in what sort of clothes people wear. This one is an interesting one because it represents a departure from the notion of using the CPI indices for clothing as the basis for adjustment, Commissioner.

PN93

Now this was an application by the Association to actually adjust clothing allowances by the clothing index, sub-index of the Consumer Price Index for the relevant period and if we go to the bottom of page 2 what the Board said is, the last paragraph:

PN94

As the hearing progressed it became clear that the simplicity of this approach would have to be disturbed from time to time to enable adjustments to be made to the item components of the various allowances as requirements and circumstances demanded.

PN95

And over the page:

PN96

As a striking illustration of this necessity the Association sought to have amendments presently made to differentiate between the plain clothes allowance for male and female members based upon the actual needs of those two groups. Similarly, apart from some minor adjustments, as to the items to be allowed for in the existing allowance.

PN97

Then it goes on about service usage, rate of pantyhose, etcetera, Commissioner. But more importantly, Commissioner, as the Board went on the Board called into question the validity of the Consumer Price Index sub-group and as an overview:

PN98

There are inherent problems in choosing to use that.

PN99

The CPI sub-group is based upon a basket of clothing that changes from time to time that is supposed to reflect what an ordinary household is expending their clothes on, Commissioner. Yet the allowance for police officers has to continue to reflect a specified standard of clothing. That is, police officers performing duty ordinarily in plain clothes cannot wear jeans and a t-shirt, Commissioner. Detectives ordinarily are required to wear, or at least male detectives to wear a suit and tie, Commissioner.

PN100

So what we have is the ABS churning their basket to reflect changes in contemporary fashion and clothing whilst to a large extent police are trapped by the types of clothes that they are required to wear in their work. We also have - I am just paraphrasing what the Board said - we also have a second problem, is that the clothing index as published has become a bit of a shifting feast, Commissioner. That is what is in or out or how it is reported has changed over time. So we have seen a shift from, in 1992, a clothing group that includes women's clothing - well, women and girls clothing, men and boys clothing and drycleaning, to a much more comprehensive survey being conducted now where the clothing sub-group can be broken down into men's outer wear, men's underwear, women's outer wear, women's underwear, infants' clothing, accessories including jewellery.

PN101

So the CPI as published, Commissioner, it has become impossible to track that as a basis of adjusting this allowance because you would have to know all the individual weightings of the CPIs components of the basket and try and pull them all apart to say what is relevant. Now what the Board commended, which is the issue, is basically saying, well, the CPI may work for a short period of time - it does note that it could be a statistical fluke if it bears any correlation with actual changes - but from time to time the parties should go away and reassess the clothing requirements for members required to perform duty in plain clothes and actually go out and cost those items.

PN102

For different reasons, Commissioner, the parties had commenced that exercise of looking at the clothing requirements for members and what they did jointly was try and work out what the clothing basket should be and that is the document that is on the last page of that particular exhibit, KENNEDY5, Commissioner, where the Association and the employer rang a number of male and female detectives and said, well, what should your wardrobe be comprised of, to get an idea of what the basket should be. The parties then, at least in respect to the majority of items, not the accessories, made arrangements to meet with Fletcher Jones, Commissioner, and get Fletcher Jones to cost comparable items for male and female clothing.

PN103

We then subsequently applied the formulas in terms of life expectancy, private usage, drycleaning, laundry and repairs that had historically been used by the Police Service Board and come up with the different figures that are set out in KENNEDY5, Commissioner.

PN104

THE COMMISSIONER: What is the position about cosmetics, Mr Kennedy? What is the position about cosmetics?

PN105

MR KENNEDY: There is no allowance made in respect of cosmetics, Commissioner, and from recollection they form a different sub-group even from clothing in the CPI, Commissioner. But it does raise a point. For example, there is no allowance in the costing of the basket for jewellery, for example, yet that is a component of the clothing CPI. Commissioner, that is an overview of what we think is the second approach and the bare bones of the evidence that relates to that approach.

PN106

So that is the approach of saying, well, the Commission has got a clean slate, I have read the certified agreement that says the allowances will be adjusted, how should we go about adjusting them. As I have said the third approach that the Commission could adopt, and it is hard perhaps to advance this fully without hearing from the employer's side, is to say, well, perhaps there is some hybrid approach that commends itself to the Commission and that is where you can identify the parties have agreed certain parts and they are not in dispute at the bar table because you have gone through the forensic exercise and some document says, you know, this will be adjusted by X per cent and there is common ground between the parties, then the Commission could take that as agreed and then purely run an exercise in respect to what is not agreed.

PN107

Now I did flag at the outset that we would deal briefly, Commissioner, with what are the powers that attach to the Commission in these circumstances. The dispute settling agreement between the parties is set out at clause 8.3 of the certified agreement, Commissioner, and what the parties, in drafting that certified agreement, have - or drafting that dispute settling procedure, have made a conscious decision to have this Commission as the or at least the person nominated by the President of the Australian Industrial Relations Commission or another person agreed by the parties, to actually resolve this dispute by binding determinations, Commissioner.

PN108

That is, without colouring the language, Commissioner, arbitration as historically has been practised by this Commission. Now in exercising that you are exercising that pursuant to section 170LW of the Act. Now that is the section that has been constructed as not giving the Commission a power to create new rights or expunge existing rights but really determine what the rights are between the parties. Now in the context of that section we would be saying what the agreement says is these rates shall be adjusted to reflect expenses. That is the issue that is agreed between the parties.

PN109

What falls to this Commission, or yourself, is to determine what the quantum of the adjustments should be and we believe that that sits comfortably within your powers under the dispute settling procedure and under section 170LW. In fact, it is clearly what we believe the dispute settling procedure was designed to do, Commissioner. As I said I am happy to expand upon those arguments at a later date if need be - - -

PN110

THE COMMISSIONER: May not be an issue, Mr Kennedy.

PN111

MR KENNEDY: - - - if the employer takes a view in respect to those. So that is the outline of our submission, Commissioner. I am not sure whether the employer want to respond at all to what is said or whether we wish to - - -

PN112

THE COMMISSIONER: Yes. Yes, thanks, Mr Kennedy. Well, we will see. Thank you for that material. I understand that there may be supplementation of that material but certainly it does set out in great body of the aspects of disagreement. Well, Mr Watson, what are you able to say now? I understand you have already indicated that you will be - you are not in a position to respond today.

PN113

MR WATSON: Yes. I would just say we would like to reserve our position and we are happy to put our arguments forward on another day once we have heard the full substance of the Association's position.

PN114

THE COMMISSIONER: Yes, all right. Well, I might do some housekeeping arranging off the record. We will do that now.

OFF THE RECORD

PN115

THE COMMISSIONER: We have had a conference about the dates. What I propose to do now is adjourn this matter until Wednesday, 3 July, in Melbourne at 10 o'clock. Mr Kennedy will be putting a concluding portion of his case which may require or may involve some supplementation. He thinks that is going to be minimal but I see there are some aspects that his research effort - where he hasn't been successful and it might be that there is some material he wants to put in.

PN116

Mr Watson, I will hear your case then. In the event that there is something new that is put of a character which justifies further consideration being given by the Force on Wednesday, that is put by Mr Kennedy on Wednesday, then it may be that on that particular point you wouldn't be in a position to respond and there could be then written filing of your submission and subsequently Mr Kennedy's final submission, his reply, on that point, but by and large I would expect that the thrust of the case will be met on Wednesday the 3rd and that includes your reply, Mr Kennedy.

PN117

Of course, the Commission is aware that the parties have an alternative road to travel and I am available to assist in that respect as I think the parties would be well aware. We will adjourn now until Wednesday the 3rd in Melbourne. Thank you.

ADJOURNED UNTIL WEDNESDAY, 3 JULY 2002 [12.57pm]

INDEX

LIST OF WITNESSES, EXHIBITS AND MFIs

EXHIBIT #KENNEDY1 COPY OF AGREEMENT PN13
EXHIBIT #KENNEDY2 ALLOWANCES RELATED TO MEALS PN57
EXHIBIT #KENNEDY3 ALLOWANCES RE USE OF PRIVATE MOTOR VEHICLES PN64
EXHIBIT #KENNEDY4 HOUSING RELATED REIMBURSEMENTS PN80
EXHIBIT #KENNEDY5 ALLOWANCES RELATED TO CLOTHING PN92