C2004/366, Transcript of Proceedings [2005] AIRCTrans 417 (18 February 2005)

1800 534 258

TRANSCRIPT OF PROCEEDINGS

---

Workplace Relations Act 1996 10424

SENIOR DEPUTY PRESIDENT HAMBERGER

C2004/366

s.113 - application to vary an award

APPLICATION BY CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION
(C2004/366)
Clay and Ceramics Industry - Brick and Terra Cotta Tile Manufacture - Victoria - Award 2000

SYDNEY

10.02AM, TUESDAY, 08 FEBRUARY 2005

PN1

MR S SMITH: I appear for the Construction, Forestry, Mining and Energy Union.

PN2

MR S SHERMAN: I appear for the Australian Industry Group.

PN3

THE SENIOR DEPUTY PRESIDENT: Thank you. I think there were some prior discussions about maybe having conciliation but, I mean, I'm sort of open to suggestions but I was thinking it would probably be best to actually run through the submissions, bearing in mind I have read the written submissions - you can it that I've read them - but going through whatever you want to put this morning in terms of submissions and the witness evidence and then seeing whether it would be appropriate to have conciliation. I'm just not sure that going straight into discussions given that the submissions, at least at the moment, look more or less diametrically opposed - I don't know whether really conciliation at this stage is probably the most appropriate, but maybe there might be some room for discussions as things evolve. Does that sound okay to the parties?

PN4

MR SMITH: That's fine with us, your Honour.

PN5

MR SHERMAN: It will be fine with us as well.

PN6

THE SENIOR DEPUTY PRESIDENT: Well then, Mr Smith, over to you.

PN7

MR SMITH: Thank you, your Honour. These are applications under section 113 of the Act to vary the definition of ordinary time earnings in the relevant awards. The purpose of the applications is to bring the definition in the awards up to be on a par with the definition of the same term in the Superannuation Guarantee Administration Act. The way it works at the moment, when you have a definition of ordinary time earnings in an industrial award that is the definition that will apply for superannuation purposes.

PN8

Where there is not a definition then the definition in the superannuation guarantee legislation will apply. We have a situation in these two awards where the definition is worse in the awards than it is legislation and in our submission that's not only unfair; that's contrary to the objects of the Act, in particular under section 3 and 88(a) of the Act. It's also inconsistent with the superannuation test case as well as wage fixing principles. In our submission the application before your Honour will not lead to an increase in labour costs which is substantial. It will lead to a minimal increase or no increase at all.

PN9

We have one witness to call today and I propose to call him now.

<TREVOR JOHN MELKSHAM, SWORN [10.05AM]
<EXAMINATION-IN-CHIEF BY MR SMITH

PN10

MR SMITH: Can you please state your full name and address for the record?
---Trevor John Melksham (address supplied).

PN11

Have you prepared an affidavit in this matter?---I have.

PN12

Could I show you this document?

PN13

THE SENIOR DEPUTY PRESIDENT: You're going to tender this?

PN14

MR SMITH: Yes, I will, your Honour.

PN15

Is that your affidavit, Mr Melksham?---It is.

PN16

Are the contents of that affidavit true and correct to the best of your knowledge?
---They are.

PN17

To the extent that that affidavit contains any opinions, are they opinions which you truly hold?---They are.

PN18

MR SMITH: I read the affidavit, your Honour.

EXHIBIT #CFMEU1 AFFIDAVIT OF TREVOR JOHN MELKSHAM

PN19

MR SMITH: Mr Melksham, could I draw your attention to the pottery industry, the industry covered by the Clay and Ceramics Pottery Manufacture Award? Can you tell us how many workers in Victoria who are covered by that award, would you say, receive first aid allowance?---The number is minimal. The two major employers under that award in Victoria are Caroma Industries Ltd and Eureka Tiles Ltd and Caroma has about 150 employees all up working over three shifts. There would be no more than two accredited first aid representatives. That's ones receiving allowances per shift, so I'd say six in that company and with Eureka Tiles, where they don't have a night shift, that would be a day and afternoon shift, there would be no more than four to the best of my knowledge.

PN20

All right, so that, I think, is a total of 10?---Yes.

PN21

MR SMITH: Is that six and four?---Yes.

**** TREVOR JOHN MELKSHAM XN MR SMITH
PN22

I have no further questions, your Honour.

PN23

THE SENIOR DEPUTY PRESIDENT: Actually, could I just ask how much actually is the first aid allowance?---I'm out of date on that, but I think it's about standard with the Metal Trades Industry Award and it's about $13 a week, I think.

PN24

MR SMITH: It's $14 something, your Honour.

PN25

THE SENIOR DEPUTY PRESIDENT: If it gives me an idea, I don't need to know the cents.

PN26

MR SMITH: I have some submissions later on. I have the exact figure.

PN27

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Sherman?

PN28

MR SHERMAN: No questions.

PN29

MR SMITH: That's the only witness that we have but I have some other evidence to tender. I can hand them up in a bundle and then read through them to save your associate. I think I accidentally handed one document too many. There's an enterprise agreement in there which I didn't intend to tender, sorry.

PN30

THE SENIOR DEPUTY PRESIDENT: Yes, the Boral Roofing?

PN31

MR SMITH: Yes. Sorry about that, your Honour.

PN32

THE SENIOR DEPUTY PRESIDENT: That's okay.

PN33

MR SMITH: Your Honour, those documents that we wish to tender are, first of all, Superannuation Guarantee Ruling 94/4.

EXHIBIT #CFMEU2 SUPERANNUATION GUARANTEE RULING 94/4

PN34

MR SMITH: An advice from the Australian Taxation Office to the CFMEU dated 18 September 1997.

EXHIBIT #CFMEU3 ADVICE FROM AUSTRALIAN TAXATION OFFICE TO CFMEU DATED 18/09/1997

PN35

MR SMITH: And the explanatory memorandum to the Superannuation Laws Amendment 2004 Measures No 2 Bill 2004.

EXHIBIT #CFMEU4 EXPLANATORY MEMORANDUM TO SUPERANNUATION LAWS AMENDMENT 2004 MEASURES NO 2 BILL 2004

PN36

MR SMITH: Thank you, your Honour. That's all the evidence we wish to tender.

PN37

MR SHERMAN: Thank you, your Honour. Largely the Australian Industry Group would be relying on our written submissions and we wish to make a couple of comments on the record, if we may, your Honour. The applications before you, as noted earlier, seek to vary the definition of ordinary time earnings in respect of awards. As such we would submit that the union must demonstrate that, firstly, there are sufficient and compelling reasons for a different definition of ordinary time earnings to apply to employees covered by these awards. Secondly, that if a compelling reason does exist, that the issue is best to be resolved by way of an award variation that considers the objects of the Workplace Relations Act rather than by enterprise bargaining or amendments to the appropriate superannuation legislation.

PN38

The Australian Industry Group submits that the CFMEU has failed to satisfy either test in the furtherance of this claim sought in the current applications. Further, that we would submit that the union bears the burden of proof for the claims which they are pursuing and the union, we would say, has failed to meet this burden of proof. Further, the Superannuation Guarantee Administration Act 1992 defines the prerequisite national earnings base which is defined in the relevant award and as such in both circumstances the current definition does exist. The current award definitions of ordinary time earnings, we would submit, already comply with the legislative requirements and we would submit that no change is required.

PN39

Further, your Honour, the CFMEUs applications we say are a blatant attempt to circumvent the purpose and intent of the Superannuation Laws Amendment 2004 Measures 2 Act 2004 and it would do nothing but deprive employers of the four year planning period as provided by the legislation. Further, the current award definitions of ordinary time earnings will only become inconsistent with the superannuation guarantee legislation as of 1 July 2008 and any variation prior to that, we would say, is premature and would lack merit. The granting of the application, as we've noted in our written submission, your Honour, would cause, we will say, a substantial increase in employers' costs. Further, the union relies on a few awards in the construction industry and claim that these awards are in a similar industry. No evidence has been put to forward or to support that claim.

PN40

Just in summary, the existing definition of ordinary time earnings in the award complies with the relevant requirements of the Workplace Relations Act, the wage fixing principles at the Commission, the superannuation guarantee legislation and also the superannuation test case decision. Accordingly, no amendment is necessary or in the public interest. We rely on our written submissions and unless you have anything further, your Honour, we have nothing at this point in time further.

PN41

THE SENIOR DEPUTY PRESIDENT: Thank you, Mr Sherman. I've actually got some questions for both of you arising out of my reading of your written submissions. I might go to Mr Sherman first as you went last.

PN42

MR SMITH: Your Honour, I'm sorry, I should have said before, we have some closing submissions as well.

PN43

THE SENIOR DEPUTY PRESIDENT: I'll ask these questions and I'll ask Mr Sherman first and then I'll ask you and then you might want to cover it then in your closing submissions but there might be some more - well, we'll see how we go because I suppose in some ways I'm looking for a bit more information than I've currently got. Now you may or may not be able to provide that to me this morning and that goes for both of you. I've got all these questions here now. One thing, if we into the detail about the - if I can put it this way, it's a little bit - you can look at the CFMEUs application in two ways if you like. One is all it's trying to do is to clarify it. At one point it talks about, I think the affidavit evidence was that Mr Melksham's affidavit talked about it. There is very little cost impact.

PN44

Basically, this is about making clear what the rules are, what the definition of ordinary time earnings sales and most of his evidence seem to be along the lines of, well actually, pretty much everybody gets this already but, you know, this is more to clarify that that is the entitlement. Your submissions on the other hand suggests that this is a radical departure and this is a substantial extension of the definition of ordinary time earnings for the purposes of certain superannuation. So I would actually like to spend a bit of time, I guess with both of you to get your views.

PN45

If we go through the application, what do we actually think is in and is out currently because I must say the current provision is fairly broadly worded and I must say I've also looked at quite a lot of other award definition for ordinary time earnings and I could put it this way, they're all over the place. So actually I'll see if we can go through - it might be, well, actually if we go to your submissions - maybe that's probably about the fairest way of dealing with it. On the submissions that you sent in on the 7 February, if you go to page 3, there in paragraph 3 you actually list what you describe as the additional component of the definitions of ordinary time earnings. On one level I think that's a reasonable statement of fact, on the other hand that they are additional components.

PN46

On the other hand it sort of begs the question, are they really additional or they might be additional words but are they actually already encompassed by what's actually in the definition now? That's something I really would like to be clear on from both sides as to what your view is about that so that I can get a better understanding of what the implications are of the applications. So if we just go down - I mean standby operator's payment, do you think that's included now or not and if you don't know, that's okay. Well you probably do know but tell me if you don't know. I don't want you to give off the cuff. It's not as if you're not competent.

PN47

MR SHERMAN: Your Honour, if I can go one step back, if you go to the current definition of ordinary time earnings, which is on page 1 of my submission. The list is very clearly the employees award wage, shift penalties, over award payments and leading hands allowances. Now if you go over to page 3, as you mentioned before your Honour, we would say that all the allowances listed there are additional or new components to the definition of ordinary time earnings.

PN48

THE SENIOR DEPUTY PRESIDENT: I'd still like to go through one by one, because some of those things you might define as allowances for example and some of you might not. So standby operators payment, you would say would not be included, presumably.

PN49

MR SHERMAN: No.

PN50

THE SENIOR DEPUTY PRESIDENT: The piece work rates are not quite so obvious to me because it's just an award wage where there is piece work where it exists in this industry.

PN51

MR SHERMAN: Yes, your Honour, but that may be one that wouldn't be or may suggests an employee's award wage.

PN52

THE SENIOR DEPUTY PRESIDENT: So you think it might be but you are not sure?

PN53

MR SHERMAN: I'm not sure.

PN54

THE SENIOR DEPUTY PRESIDENT: So mixed function payments, presumably. What do you think on that one?

PN55

MR SHERMAN: Again, I am not sure.

PN56

THE SENIOR DEPUTY PRESIDENT: First aid allowance, presumably you'd say, no.

PN57

MR SHERMAN: No.

PN58

THE SENIOR DEPUTY PRESIDENT: Presumably, for ..... staff ..... allowances, you'd say, no. Industry allowance, how much is the industry allowance, by the way, do you know? If I get to know these awards better I - - -

PN59

MR MELKSHAM: I do know, your Honour. The industry allowance is not specified in the award. In one of the National Wage Cases I actually dismissed, but it's part of the - it specifies in the award that it's part of the award wage.

PN60

THE SENIOR DEPUTY PRESIDENT: Okay.

PN61

MR MELKSHAM: So if not shown separate in the table the total becomes, you know, the award wage.

PN62

THE SENIOR DEPUTY PRESIDENT: On that basis it sounds like, do you agree, that it probably is already included if you accept, I mean you may not be sure, and you may want to look at this yourself, but if it is part of the award wage then you think it would be included in the definition.

PN63

MR SHERMAN: Well, if it is isn't then part of the award wage, it would already be included.

PN64

THE SENIOR DEPUTY PRESIDENT: Licence allowance, probably you'd say no. Now, this one I'm really not sure about. Penalty payments for hours worked on a Saturday or Sunday because what the definition in 18.1.3 is that it refers to shift penalties. Now in some awards shift penalties would definitely include weekend penalty rates, like a weekend shift. But I don't know, do you know, it's obviously more significant probably to some of the others in terms of potential implications.

PN65

MR SHERMAN: Well, your Honour, this again, I'm not too sure and if you need some further clarification I can - - -

PN66

THE SENIOR DEPUTY PRESIDENT: Well, remuneration while on annual leave, personal leave or long service leave.

PN67

MR SHERMAN: Maybe.

PN68

THE SENIOR DEPUTY PRESIDENT: Maybe.

PN69

MR SHERMAN: Maybe, I'm not too sure.

PN70

THE SENIOR DEPUTY PRESIDENT: All other allowances that are not reimbursements of expenses. Well, does it mean your answer on that is no?

PN71

MR SHERMAN: No.

PN72

THE SENIOR DEPUTY PRESIDENT: Casual loading?

PN73

MR SHERMAN: Not sure, your Honour.

PN74

THE SENIOR DEPUTY PRESIDENT: Top up payments or ..... to make up payments when the employee works.

PN75

MR SHERMAN: No.

PN76

THE SENIOR DEPUTY PRESIDENT: As in no they're not included or you're not sure?

PN77

MR SHERMAN: They are not included.

PN78

THE SENIOR DEPUTY PRESIDENT: Public holiday payments?

PN79

MR SHERMAN: Maybe included in the employees award wage and government subsidies, no.

PN80

THE SENIOR DEPUTY PRESIDENT: Okay.

PN81

MR SHERMAN: Your Honour, if I can make a point of clarification and I'm sure that you've read our submission. Our submission isn't that these requests do not comply with the superannuation guarantee ruling of 94/4. That's not our argument.

PN82

THE SENIOR DEPUTY PRESIDENT: No.

PN83

MR SHERMAN: Well, our argument is that the current definition already complies with the legislation.

PN84

THE SENIOR DEPUTY PRESIDENT: I understand that but you've both put some contrary - I mean it's not determinative of the outcome if I can put it that it won't slow the application. But obviously, for example, you know, how one might treat this application if all it is doing is clarifying what's in and what's out but it's not making a lot of substantial change. If that's was to be the case then you would look at it one way. If what it is, is what you described as a radical departure and a big extension, then you'd look at it another way. That doesn't actually say one's right and one's wrong but I need to understand what the factual - I have to say though that the next question I suppose or maybe it's not the next question, but one of the questions obviously is - I mean you made submissions about cost impact and what you just said to me to be frank is that on a lot of these parts of the proposed new definition you actually don't know whether they're included or not.

PN85

MR SHERMAN: Some of them proposed we don't.

PN86

THE SENIOR DEPUTY PRESIDENT: Well, some of them, I'm not saying all of them, but I suppose that does beg the question in my mind, and this goes, actually I'll come back, this goes on both sides. You both made submissions about the cost impact in very broad terms, the diametrically opposed submissions. What I'm looking for is some evidence or at least some detailed substantiation on both sides of that, because, you know, if most of these things are already included, then it was just cost impact is not very much at all. If they're not then there could be a significant cost impact. Have you got any more evidence or any moire substantiation on this point of view. You said the cost impact to be substantial.

PN87

ME SHERMAN: No, your Honour, we do not have any further evidence on this matter.

PN88

THE SENIOR DEPUTY PRESIDENT: I've got some more questions. I think probably it's ..... difficult question but are you aware that in recent years, if I can say, the last six years or so, apart from those construction industry awards that Commissioner Jones dealt with, are you aware of any other awards that have had changes made to their definition of ordinary time earnings in the award? In other words and this is probably more a question for the CFMEU but I would be interested in your views on it, in other words the situation like here where we've already got a definition of ordinary time earnings in the award and then there has been change made to that definition, now obviously that did happen with certain awards that are referred to in the CFMEU submissions, but are you aware of any others, that that's happened.

PN89

MR SHERMAN: No, your Honour.

PN90

SENIOR DEPUTY PRESIDENT: Then, okay, next question. Actually I did get a bit of - in your submission you refer to the fact that, basically what you said was that the legislation that was passed last year by Parliament actually will mean that, what you said was 1 July 2008. In a sense, this is a non issue because the award definition will be if you like made irrelevant for the purposes of determining the amount of superannuation we'd like to pay. What will count is what is now a default definition. There is just a query actually about the date. You refer to 2008. I had a look through the instruction memorandum.

PN91

MR SHERMAN: Yes, your Honour.

SENIOR DEPUTY PRESIDENT: I could only find 2010.

PN92

MR SHERMAN: In the explanatory memorandum for the Bill, it was indeed 2010. It was a minor amendment when the Bill was passed in 2008.

PN93

SENIOR DEPUTY PRESIDENT: I wondered when I couldn't find it if that was the case. I think that is my last question for you. Thank you. Mr Smith, we might just go through that again.

PN94

MR SMITH: Yes, your Honour.

PN95

THE COMMISSION: In terms of your views and some of Mr Melksham's affidavit goes into this a bit. We might actually look at the AIG submission, the list in terms of what you think is in and what you think is out.

PN96

MR SMITH: Yes, your Honour.

PN97

SENIOR DEPUTY PRESIDENT: We might just go down the list. I mean standby operators payments.

PN98

MR SMITH: Your Honour, I was going to make some submissions about the structure of the clause in my closing submission so I am prepared to do that now.

PN99

SENIOR DEPUTY PRESIDENT: All right, you know what the question is so we will answer those questions. Do you want to go through then and just give me time to make sure I get that?

PN100

MR SMITH: I'm pretty much going to run through the list anyway. So starting there with standby operators payments, I was going to deal with them in compass of terms, which are standby operator payments, piece wear breaks and mixed functions payments as well as a little bit further down, penalty payments for ordinary hours worked on a Saturday or a Sunday. The reason why those terms have been inserted in our proposed clause, is that they are all listed as part of wage rates under clause 16 of the awards. They are part of wage rates. Superannuation contributions are already being made on those payments by and large and that is the evidence of Mr Melksham, in particular paragraphs 6, 7 and 8.

PN101

SENIOR DEPUTY PRESIDENT: So, presumably you would say that they are currently included in the definition?

PN102

MR SMITH: Yes, your Honour.

PN103

SENIOR DEPUTY PRESIDENT: Are you aware of a situation where not being spelt out in this way has been a problem?

PN104

MR SMITH: Yes and I think there is evidence in Mr Melksham's affidavit that says there have been small claims here or there where the argument is made by an employer that that is not subject to superannuation contributions, and that's part of the purpose of the application, to clear it up, to create more certainty regarding the definition itself.

PN105

SENIOR DEPUTY PRESIDENT: Okay.

PN106

MR SMITH: If we go through the clause. I should add that nothing that's currently in the definition of ordinary time earnings in the awards has been taken out by our proposed variations. Just terms have been inserted. We have inserted a bunch of allowances there; first aid allowance, manganese dioxide and other pigments allowance, industry allowance and licence allowance.

PN107

SENIOR DEPUTY PRESIDENT: Just on that industry allowance. Mr Melksham said that it was actually part of the award wage.

PN108

MR SMITH: It is, your Honour.

PN109

SENIOR DEPUTY PRESIDENT: Are you sure it is not included now?

PN110

MR SMITH: It is included. It is being paid now.

PN111

SENIOR DEPUTY PRESIDENT: So you would say first aid allowance and manganese dioxide allowances are not paid?

PN112

MR SMITH: Probably not, they may be making contributions right now.

PN113

SENIOR DEPUTY PRESIDENT: You wouldn't say they were obliged to make a standard allowance.

PN114

MR SMITH: Yes, quite possibly. In fact, I should say that both industry allowance and licence allowance are included in the award wage at the moment. That is clear from the wording of the clauses of the award, in particular clause 16 and clause 17.6, as well as the evidence of Mr Melksham in paragraph 10.
In regards to first aid allowance and the manganese dioxide allowance, those are the only two allowances which in our submission, could possibly lead to an increase in costs as a result of these variations.

PN115

SENIOR DEPUTY PRESIDENT: You gave me some evidence on first aid and is there evidence on the - - -

PN116

MR SMITH: On the manganese dioxide allowance, yes, at paragraph 9 of
Melksham's affidavit. As well, you will note that paragraph 9 of Melksham's affidavit talks primarily about the Brick and Terracotta Award. The verbal evidence from Mr Melksham today related to the Pottery Award. The first aid allowance is not paid to many workers in the industry at the moment.

PN117

Your Honour, just on those allowances, I should say as well, the reason why the allowances have been inserted is because they're in non reimbursement style allowances under 94 (4). I prepared a schedule outlining those allowances and the amount of the allowances and how much extra superannuation contributions there could be. It is just basically a straight calculation from the award, so I would like to hand that up, if I can.

PN118

SENIOR DEPUTY PRESIDENT: You don't need to actually formally tender - it is not necessary.

PN119

MR SMITH: No, it's just part of our submission. You can see there, your Honour, there are two tables. The first table deals with the Brick and Terracotta award and the allowances are listed there. You can see the first aid allowance is $14.40 per week. That only goes to workers who have the qualification and who are performing those duties and you can see that the contribution on that will be only $1.30 per week. On Melksham's evidence, there are only about 20 workers who get that and the manganese dioxide allowance. That's $1.25 per hour for the first 2 hours. Where work goes on over that 2 hour period, then there is a daily rate applicable of $8.92. Melksham's evidence is that that daily rate is rarely ever paid and you can see from the last column there, that superannuation contribution on top of the manganese allowance is only 11 cents per hour or 80 cents on the daily rate and once again, there is only about 20 workers who that will affect.

PN120

Industry allowance and licence allowance, there is no additional contribution required because they are already rolled into the wage rates and on the final table there for the Pottery Award, again it is the same calculation for first aid allowance.

PN121

SENIOR DEPUTY PRESIDENT: Thank you, can we return to this list again?

PN122

MR SMITH: Yes, certainly, your Honour.

PN123

SENIOR DEPUTY PRESIDENT: So we are down to industry allowance and licence allowance. Now penalty payments?

PN124

MR SMITH: Penalty payments for ordinary hours worked on a Saturday.

PN125

SENIOR DEPUTY PRESIDENT: Do you agree they are included?

PN126

MR SMITH: Yes, they are part of clause 16 of the award wage rates. Superannuation contributions are already made on those payments. They are part of ordinary hours and once again I refer your Honour to the evidence of Melksham in paragraph 8, in that regard.

PN127

SENIOR DEPUTY PRESIDENT: And then annual leave?

PN128

MR SMITH: Yes, remuneration while on annual leave, personal leave or long service leave. In fact, pretty much rest of the terms there. I'll read through them on to the transcript. Remuneration while on annual leave, personal leave or long service leave, all other allowances that are not reimbursement allowances, casual loading - - -

PN129

SENIOR DEPUTY PRESIDENT: What other allowances are not reimbursement of expenses would there be?

PN130

MR SMITH: There are none under the award. That's a catchall phrase and I understand that my friend has taken issue with that and if that is going to be a major issue preventing the making of these variations, we are happy to remove it. My friend is right, that it is different from the construction industry clauses that have been inserted. We have no problem with that.

PN131

Where was I up to? Top up payments or ..... make up payments ,when the employee works, public holiday payments and government wage subsidies. All of those, your Honour, save for public holiday payments, are terms that have been taken from 94(4) and in particular paragraph 18 of 94(4) and the evidence of Melksham is that superannuation contributions are already being made on all of those payments. I think he said he is not sure about casual loading, from memory, but casual loading will be if superannuation contributions are not being made on casual loading. That will only be about 25 cents per hour, we think. That will just be a 9 per cent contribution on top of the 20 per cent loading.

PN132

SENIOR DEPUTY PRESIDENT: Is your submission that, in fact, legally as the award stands, they should be paid on casual loading?

PN133

MR SMITH: Yes, they should be. So it's just in there to make it clearer, and their terms have come from 94(4) as well, just to make it clear. The only differences between the proposed clause for Brick and Terracotta award and the clause proposed for the Pottery award, is that the Pottery award does not include reference to manganese dioxide allowance, industry allowance or licence allowance. But we have inserted in there in the Pottery award, the following; penalty awards for ordinary hours worked outside of the spread of hours from 6.00 am to 6.00 pm. Now that has been inserted, your Honour, because of the effect of clause 19.1.3 of the award that essentially says that such work is considered part of ordinary hours. So it is there to basically make it clear that those hours are part of ordinary time earnings. That is the only differences between the two clauses.

PN134

THE SENIOR DEPUTY PRESIDENT: So you're actually saying that, as things stand, the only additional elements that are included in your definition that are at least meant to be encompassed now are the first aid allowance and maybe .....

PN135

MR SMITH: That's correct, yes.

PN136

THE SENIOR DEPUTY PRESIDENT: The rest of it's just clarification.

PN137

MR SMITH: That's correct.

PN138

THE SENIOR DEPUTY PRESIDENT: Anything else? Other questions?

PN139

MR SMITH: I have more final submissions.

PN140

THE SENIOR DEPUTY PRESIDENT: I'm just checking. You may have already answered it. Well, I have that question about are you aware of any other award? Apart from that bunch that you've left in your submission that Mr Jones dealt with the construction industry, are you aware of any other awards?

PN141

MR SMITH: No, your Honour.

PN142

THE SENIOR DEPUTY PRESIDENT: The next one you've answered. The next one you've answered. The next one I've got the answer to and the next one I've got the answer to. I suppose what would be - ..... may have a bit more information on this, but if what this is more about, leaving aside those two allowances, is clarifying things to prevent disputes, small disputes realistically because on your submission it's not much money, it would be useful to have as much detail as - well, a reasonable amount of detail about how often these problems arise. I mean, is this a real problem? I suppose a question I've got really got is, why are you making this application now? This clause has been in there for many years now and indeed when this legislation was passed last year, it's actually going to be within two years, or two-and-a-bit years, irrelevant. Okay, there's another two-and-a-bit years to go, but why are you doing this now? Has there been some problem that has arisen?

PN143

MR SMITH: There are ongoing problems, your Honour, with wage claims, with employers arguing what's to be included in ordinary-time payments. Obviously, employers and unions and workers refer to the award in the industry. They look at it and they read it on its plain meaning, so it's there to clear that up, in particular, but also to bring it on a par with a definition in the legislation as well, which we consider is important, not only to possibly increase some of the superannuation contributions for workers, even only minorly, but also just for the purposes of the Act, to create a fair and reasonable safety net which in our submission is not occurring because of the clause as it stands now. The reason why the application has perhaps taken so long, I guess, is because there's a long and torturous history about these variations. The variations to the other construction industry awards took a very long time and they were delayed by the award simplification process, and all of that. It's more a matter of, finally we've got around to it, sort of thing.

PN144

THE SENIOR DEPUTY PRESIDENT: But there wasn't some major problem on the site?

PN145

MR SMITH: No.

PN146

THE SENIOR DEPUTY PRESIDENT: But you said there have been ongoing problems? But you don't have any more detail you could give me this morning on what those - not in general terms but like we've had, you know - are we talking about, with these awards, how many employees are we talking about?

PN147

MR SMITH: How many employers?

PN148

THE SENIOR DEPUTY PRESIDENT: Employers and/or employees.

PN149

MR SMITH: I can get instructions on that.

PN150

MR MELKSHAM: We tend to think, your Honour, in terms of sites because multiple sites belong to one company.

PN151

THE SENIOR DEPUTY PRESIDENT: How many sites?

PN152

MR MELKSHAM: We're probably talking about at least 50 on the east coast, sorry, covered by this award, three less than there were last year because
Johnson Tiles shut. There'd be about 20 sites, unionised sites. If you're talking about all up, in the pottery industry, as distinct from the brick which is very sort of centralised, there are that many small, one and two-person potteries that tend not to be unionised and I don't know how many of those. I would say in the hundreds of those sorts of places in Victoria alone because anywhere in the rural areas there always seems to be some little pottery.

PN153

If it's appropriate, and I'm not sure whether it is because no one's asked it, you asked the question. Our employers are basically honest and honourable people but as things go on with centralised pay obviously we have a wages officers' complaint, all with 50 different awards to deal with. Mistakes happen. I can walk into any plant in the industry and find an error. Trying to get those things sorted out is labour intensive and time consuming because the data we have to go on is so broad and you end up in arguments. Employers want to keep their costs down. They say, "No, that's not ordinary pay, that's not ordinary pay." So we decided we have to tidy that up.

PN154

THE SENIOR DEPUTY PRESIDENT: While that's certainly interesting. I mean, I suppose what I'd really like to see is the frequency of this. How often do these problems arise in relation to the awards we're looking at in this issue?

PN155

MR SMITH: I can recall Mr Melksham to the ---

PN156

THE SENIOR DEPUTY PRESIDENT: Yes, perhaps that's the best way of doing it, more appropriate.

<TREVOR MELKSHAM, RECALLED ON FORMER OATH [10.37 AM]
<FURTHER EXAMINATION BY MR SMITH

PN157

MR SMITH: Mr Melksham, how often are there disputes in the industry concerning the definition of ordinary time units?---They would - I can't put a statistical number to it; we don't keep those sorts of records. We tend to deal with these on the go by the organisers, but they are a regular occurrence, and I would say that every time we look, we would find something. They'll usually come about when a company wants to make alterations to its working arrangements - non-standard shift hours and rosters and what-have-you are always - are becoming more prevalent and every time an employer wants to do one of those things we will find that errors will be made in superannuation and issues like - and the common ones are, if you want, public holiday payments for shift workers because it's by roster, they're required to work. When they're not on roster, if there's a public holiday they get a day's pay in lieu. We have arguments over whether the public holiday payment is actually ordinary time earnings or a penalty rate. They see it as like an overtime payment, and they see the extra payment at times as not being part of the ordinary hours of work. That's the day they're paid for the holiday when they're rostered off shift, which is a requirement, I think, which stems from the public holidays test case in '94 where you have to give ten holidays a year. It's also consistent with 94(4). We have arguments over that one. We have arguments over the weekend payments because again, employers, even though they tend to be honest, they just see them a little bit differently. They see them as more like overtime, that weekend penalty rates works like overtime.

PN158

THE SENIOR DEPUTY PRESIDENT: But this is you're talking about where people are actually rostered on as part of their ordinary hours - - -?---Yes.

PN159

- - - they've always worked?---Yes, yes. Your Honour, the four-on, four-off type shift, 12 hour shift arrangement is becoming, particularly in the brick industry, more prevalent, and that roster is an average 42 hour roster and that - a lot of - and they're all on average pay systems or salary-type arrangements and those things, so that pay is made up of a number of penalties and shift allowances and, in some cases, even annual leave loading and public holiday payments are rolled in, sometimes they're paid separately and so it leads to a lot of confusion. We're trying to just clarify this thing. That 2008 business when we - asked for the application be made, I've never heard of it. I just know that I wanted this problem fixed and three years is too long to wait. I can give you an example of where this thing causes confusion. In a company called CSR they own a brickworks at Schofields and under their enterprise agreement they are all on salary, or what's called a salary. But there's also an attachment that says all the components that make up that salary including over-awards and allowances. The kiln operators at their plants at Maitland in NSW are on a similar type of arrangement but in their agreement it's called an average pay which are not a salary under C so ..... interpretation they'll pay the 9% on the salary but they won't pay the 9% on the average pay and they strip some of the components out of it. Yet, for all intents and purposes, they're both made up the same way.

**** TREVOR JOHN MELKSHAM FXN MR SMITH
PN160

But isn't that going to be - leaving aside this doesn't ..... in NSW. I mean, would an award change like this deal with that problem? There's going to be issues with what's ordinary time earnings?---Yes.

PN161

Even leaving aside the award, even in 2008 when the award provisions aren't relevant any more, as people move towards annualised pay and salary arrangements and so on, especially if it's a 42 hour average?---Yes. I think - maybe not in the situation I propose. I gave that as an example of the sorts of things that can occur, but with respect to most of the type of shift arrangements we have, which are an average pay type, it quite clearly says, well, if you get these allowances and they're built into your pay, they become part of your wage and you get super paid on them, but even if you get them paid separately as allowances, they're still part of your wage that you get paid super on. It just clarifies things. I don't know how you put it here, but pay officers are a law unto themselves. They generally think that they are more powerful than the board of directors and they set policy, make policy. That's just a fact of life, unfortunately. Even a company like CSR or Boral --- the Boral pay office in Pennant Hills covers the whole east coast and they've got all the awards and agreements to deal with and the states have to then - at least having a point of reference allows us to clear these up a lot quicker. They can take a lot of time. I've been working on one at Boral Kempsey, which is for some reason managed out of Brisbane, for well over a year now and I still haven't got it sorted. Every time we get close they change their management. It can be confusing.

PN162

MR SMITH: Yes. I have no further questions.

PN163

THE SENIOR DEPUTY PRESIDENT: Do you - - -

PN164

MR SHERMAN: No, no questions, your Honour.

PN165

THE SENIOR DEPUTY PRESIDENT: Thank you very much.

<THE WITNESS WITHDREW [10.43AM]

PN166

THE SENIOR DEPUTY PRESIDENT: I wonder whether it would be good to go off the record now and go to conciliation. Is that okay?

PN167

MR SHERMAN: Yes.

PN168

MR SMITH: Yes, certainly, your Honour.

OFF THE RECORD

PN169

THE SENIOR DEPUTY PRESIDENT: Mr Smith?

PN170

MR SMITH: Thank you, your Honour. First of all, I've prepared copies of all the cases referred to in our written submissions to hand up. I'm not quite sure if you would already have them, your Honour, but I'll hand them up.

PN171

THE SENIOR DEPUTY PRESIDENT: Thank you.

PN172

MR SMITH: I've taken the liberty of just marking the quotations we've referred to as well. We rely upon our written submissions in this matter predominantly. There are three versions of the written submissions. There are our original written submissions. There's a response to the AIG's outline of contentions and there's a further response to their full submissions. We rely upon all of them.

PN173

The purpose of the applications is to provide greater clarity to the definition of ordinary time earnings in the awards, as well as to bring the definition up to be on a par with the definition in the Superannuation Guarantee Administration Act. In our submission that is in the public interest and it would provide for a small increase in our superannuation contributions, a minimal increase, and we rely upon our earlier submissions regarding the cost impact of that. It will set out what is included and that will help resolve disputes in the industry.

PN174

It's our submission that the proposed clauses are allowable and we refer your Honour to paragraphs 2.1 and 2.2 of our first written submissions. The proposed clauses are consistent with wage case principles and the superannuation test case and I ref your Honour to paragraphs 3.1 through to 4.4 of our written submissions.

PN175

I note that the AIG has presented no evidence today regarding the cost impact of this application. We submit that the Commission should accept the evidence of Mr Melksham in that regard, as well as our earlier submissions.

PN176

It's our submission the Commission should follow the line of authority that has varied other awards in similar terms to the variation proposed today. Those awards are the National Building and Construction Industry Award, the Building and Construction Industry ACT Award, the Roof Slaters and Tilers Victoria Award and the National Joinery and Building Trades Products Award. It's our submission the AIG has not presented a convincing case as to why that line of authority should not be followed.

PN177

In our submission the application is in the public interest under section 90 of the Act and in that regard I refer your Honour to paragraphs 123 to 125 of Print Number 907231. That is the decision of Commissioner Jones dated 30 July 2001, where those awards I mentioned earlier were varied. I have a number of paragraphs I'd like to refer your Honour to in that decision which may help in your deliberations, in particular paragraph 92, paragraph 100 - the fifth dot point in particular - paragraph 113, 114, 128, 129 and 133.

PN178

Finally, your Honour, it's our submission that the federal government appears to see a need to make a change similar to this, and in particular the AIG has referred to that in their submissions - the Superannuation Laws Amendment Act. The AIG has relied upon the explanatory memorandum to that Act. I refer your Honour to some paragraphs which demonstrate that such a change will reduce complexities for employers and provide a fairer system for employees and those paragraphs I refer you to are paragraphs 4.7, 4.10, 4.15, 4.16, 4.18, 4.19 and 4.21. We commend the draft orders to the Commission, your Honour.

PN179

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Sherman, do you have anything?

PN180

MR SHERMAN: Nothing further, your Honour.

PN181

THE SENIOR DEPUTY PRESIDENT: I'll reserve my decision. Thank you.

<ADJOURNED ACCORDINGLY [11.14AM]

LIST OF WITNESSES, EXHIBITS AND MFIs

TREVOR JOHN MELKSHAM, SWORN PN9
EXAMINATION-IN-CHIEF BY MR SMITH PN9
EXHIBIT #CFMEU1 AFFIDAVIT OF TREVOR JOHN MELKSHAM PN18
EXHIBIT #CFMEU2 SUPERANNUATION GUARANTEE RULING 94/4 PN33
EXHIBIT #CFMEU3 ADVICE FROM AUSTRALIAN TAXATION OFFICE TO CFMEU DATED 18/09/1997 PN34
EXHIBIT #CFMEU4 EXPLANATORY MEMORANDUM TO SUPERANNUATION LAWS AMENDMENT 2004 MEASURES NO 2 BILL 2004 PN35
TREVOR MELKSHAM, RECALLED ON FORMER OATH PN156
THE WITNESS WITHDREW PN165