Fair Work Act 2009
s.156 - 4 yearly review of modern awards

4 yearly review of modern awards – common issue – annual leave – insertion of model terms – Educational Services (Teachers) Award 2010

1. Background

[1] Section 156 of the Fair Work Act 2009 (Cth) (the FW Act) requires the Fair Work Commission (the Commission) to conduct a 4 yearly review of modern awards as soon as practicable after 1 January 2014. As part of the first 4 yearly review, the Commission dealt with a number of claims in relation to annual leave as a ‘common issue’ in AM2014/47.

[2] In the 4 yearly review of modern awards – Annual leave decision 1 (the June 2015 decision) and a subsequent decision2 (the September 2015 decision) the Annual Leave Common Issue Full Bench determined model clauses for the provisions of cashing out of annual leave, excessive annual leave, granting annual leave in advance and EFT and paid annual leave. In a decision handed down on 23 May 20163 (the May 2016 decision) the Annual Leave Common Issue Full Bench proposed some redrafting of three of the model terms – cashing out of annual leave, annual leave in advance and excessive annual leave. The terms of those three model terms were finalised in the Annual Leave Common Issue Full Bench’s decision of 24 June 20164 (the June 2016 decision).

[3] This decision deals with the variation of the Educational Services (Teachers) Award 2010 (the Teachers Award) in relation to the insertion of various annual leave model terms as part of the 4 yearly review.

[4] In a Statement issued on 23 November 2015 5 the Annual Leave Common Issue Full Bench constituted to determine matters under the annual leave common issue noted a number of submissions were made in relation to specific employment arrangements in the Educational Services (Teachers) Award 2010, the Higher Education Industry – Academic Staff Award 2010 and the Higher Education Industry – General Staff Award 2010 (the Education awards).

[5] On 8 April 2016, 6 Justice Ross directed this Full Bench hear and determine the substantive issues raised in the Education awards and finalise the implementation of the annual leave terms in these awards.

2. The Legislative Context

2.1 The Review

[6] Section 156 of the Fair Work Act 2009 (Cth) (the FW Act) requires the Commission to conduct a 4 yearly review of modern awards as soon as practicable after 1 January 2014.

[7] Subsection 156(2) specifies what must and may be done in the Review:

“(2) In a 4 yearly review of modern awards, the FWC:

(a) must review all modern awards; and

(b) may make:

(i) one or more determinations varying modern awards; and

(ii) one or more modern awards; and

(iii) one or more determinations revoking modern awards; and

(c) must not review, or make a determination to vary, a default fund term of a modern award.

Note 1: Special criteria apply to changing coverage of modern awards or revoking modern awards (see sections 163 and 164).

Note 2: For reviews of default fund terms of modern awards, see Division 4A.”

[8] Subsection 156(5) requires each modern award to be reviewed ‘in its own right’. In National Retail Association v Fair Work Commission 7 the Court noted the purpose of the ‘in its own right’ requirement is to ensure the review is ‘conducted by reference to the particular terms and the particular operation of each particular award rather than by a global assessment based upon generally applicable considerations’.

[9] The scope of the Review was outlined in the Preliminary Jurisdictional Issues Decision. 8 It was acknowledged ‘The Commission is obliged to ensure that modern awards, together with the NES, provide a fair and relevant minimum safety net taking into account, among other things, the need to ensure a ‘stable’ modern award system (s.134(1)(g)). The need for a ‘stable’ modern award system suggests that a party seeking to vary a modern award in the context of the Review must advance a merit argument in support of the proposed variations’.9 This decision considers the unique characteristics of employment under the Teachers Award in the context of the proposed annual leave model terms.

2.2 The modern awards objective

[10] The modern awards objective is set out in s.134 of the FW Act. It states:

“134 The modern awards objective

What is the modern awards objective?

(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:

(a) relative living standards and the needs of the low paid; and

(b) the need to encourage collective bargaining; and

(c) the need to promote social inclusion through increased workforce participation; and

(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and

(da) the need to provide additional remuneration for:

(i) employees working overtime; or

(ii) employees working unsocial, irregular or unpredictable hours; or

(iii) employees working on weekends or public holidays; or

(iv) employees working shifts; and

(e) the principle of equal remuneration for work of equal or comparable value; and

(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and

(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and

(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.

This is the modern awards objective.

When does the modern awards objective apply?

(2) The modern awards objective applies to the performance or exercise of the FWC’s modern award powers, which are:

(a) the FWC’s functions or powers under this Part; and

(b) the FWC’s functions or powers under Part 2–6, so far as they relate to modern award minimum wages.

Note: The FWC must also take into account the objects of this Act and any other applicable provisions. For example, if the FWC is setting, varying or revoking modern award minimum wages, the minimum wages objective also applies (see section 284).”

[11] No particular primacy is attached to any of the above considerations and not all will necessarily be relevant in the context of a particular proposal to vary a modern award. 10

[12] Section 138 of the FW Act provides that terms included in modern awards must be ‘necessary to achieve the modern awards objective’. What is ‘necessary’ will involve a value judgment based on the assessment of the considerations stated in s.134(1)(a) to (h), having regard to the submissions and evidence. 11

[13] The modern awards objective applies to the exercise of the Commission’s modern award powers which are defined to include the Commission’s functions or powers under Part 2-3 of the FW Act. The Review function is set out in s.156, which is in Part 2-3 and therefore will involve the performance or exercise of the Commission’s modern award powers.

3. The model terms

[14] In the 4 yearly review of modern awards – Annual leave decision 12 (the May 2016 decision) the Annual Leave Common Issue Full Bench decided to vary a number of modern awards by inserting various annual leave model terms. The model terms relate to the following:

• Cashing out of annual leave;
• EFT and paid annual leave;
• Leave in advance; and
• Excessive annual leave.

[15] We now turn to the model terms that were the subject of parties’ submissions and this decision. In the May 2016 decision the Annual Leave Common Issue Full Bench referred to reasons given in the June 2015 decision for why the model terms were inserted. We summarise these reasons below.

3.1 Annual leave in advance

[16] The Employer Group 13 sought to insert a provision allowing annual leave to be taken in advance into 48 modern awards. The Teachers Award was included in the original claim.

[17] The Annual Leave Common Issue Full Bench was persuaded the model term would further the objective of ensuring modern awards provide a fair and minimum safety net. 14 The Full Bench was also persuaded that annual leave in advance provisions would be beneficial to employees, because it would give them the ability to take paid leave (with agreement of the employer) at a time they may not otherwise be able.15 It would also give employees the opportunity to take their leave at a time which aligns with their personal preference to do so and would have the effect of encouraging employees to take their leave.16

[18] The Annual Leave Common Issue Full Bench expressed a provisional view that it was appropriate to vary all modern awards to incorporate a model term providing for annual leave to be taken in advance. 17

3.2 Cashing out of annual leave

[19] The Employer Group 18 sought to insert a clause providing for the cashing out of annual leave into 120 modern awards. The Teachers Award was included in the original claim.

[20] The Annual Leave Common Issue Full Bench was persuaded that a cashing out of annual leave provision would ensure each modern award provides a fair and relevant minimum safety net and such variation was necessary to achieve the modern awards objective. 19 The Annual Leave Common Issue Full Bench noted the purpose of annual leave is to provide a period of rest and recovery from work and attend to family or other commitments and engage in social, community or personal interests.20

[21] However, it was also acknowledged employees benefit from such provisions because they have the ability to exercise a preference they may have to be paid in cash rather than taking leave and employers benefit by reducing their liabilities. 21 Further, the Annual Leave Common Issue Full Bench noted the various safeguards in the model term contribute to it being ‘fair’ and the mutual benefits that result from such a clause explains why these provisions are relatively common in enterprise agreements approved by the Commission.22

[22] The Annual Leave Common Issue Full Bench decided the variation of all modern awards to incorporate a provision allowing cashing out of annual leave was appropriate.

3.3 Excessive annual leave

[23] The Employer Group 23 sought to insert a clause dealing with excessive annual leave accruals into 70 modern awards. The Teachers Award was not the subject of the original claim.

[24] The Annual Leave Common Issue Full Bench noted the excessive annual leave model term was intended to assist in the reduction or elimination of excessive leave accruals, subject to appropriate safeguards, and in line with the statutory framework. 24 It acknowledged this is a significant issue for both employers and employees. When excessive leave is taken, employees benefit from rest and recovery and employers reduce their contingent liabilities.25

[25] The Annual Leave Common Issue Full Bench expressed a provisional view that a model term dealing with excessive annual leave accruals should be inserted into all modern awards. 26

3.4 EFT and paid annual leave

[26] No variation to the Teachers Award was proposed in relation to EFT and paid annual leave and therefore this was not the subject of the parties’ submissions or our consideration in this decision.

3.5 Draft determination

[27] A draft determination 27 varying the Teachers Award was published on 29 June 2015 and interested parties were invited to comment. A revised draft determination28 was published on 30 September 2015 and parties were again invited to comment. The revised draft determination proposed to insert the annual leave in advance, cashing out of annual leave and excessive annual leave model clauses into the Teachers Award.

4. The Submissions

[28] Submissions were received from the Associations of Independent Schools (AIS) and the Independent Education Union (IEU). AIS made submissions on behalf of six employer associations representing more than 1,020 employers. 29 The IEU represents teachers in non-government schools who are covered by the Teachers Award.30

[29] The IEU submit the model clauses should only apply to teachers covered by Schedule B of the Teachers Award – Teachers employed in early childhood services operating for at least 48 weeks per year. 31

[30] The IEU note it had had discussions with AIS and the parties agree on a common position opposing the insertion of the model clauses as proposed in the draft determination. 32 It argues the model clauses would not provide benefits to employers or employees.33

[31] At all stages both employer and union parties were in agreement that none of the three model terms should be inserted in the Teachers Award. The overarching position of the parties is that the individual arrangements of schools, in particular the requirement for teachers to be present at term time and current Award provisions deeming annual leave is taken during non-term time, render the model clauses unnecessary in the Teachers Award.

4.1 Annual leave in advance (proposed clause 21.4) 34

[32] The AIS submit it does not support the inclusion of the annual leave in advance model clause. 35 It argues an annual leave in advance clause is not relevant to the Award because the current Teachers Award provisions restrict the taking of annual leave to only non-term (non-teaching) weeks.36 It refers to clause 21.2 of the current Teachers Award, noting employees must take annual leave during non-term weeks and clause 19.8 which deems an employee’s absence from school during non-term weeks as including their entitlement to annual leave.37 It also notes clause 19.3 of the current Teachers Award, which states an employee is not generally required to attend for periods of time when students are not present.38

[33] The AIS submits it is not possible for a teacher to take annual leave at any other time except four weeks of the 11 non-term weeks of a year, and granting annual leave during term weeks would result in a number of problems. 39 It submits these problems would include the need to find a replacement teacher, the teacher needing to take an equivalent period of leave without pay during non-term weeks, confusion when compared to the current arrangements, and teachers adopting the assumption that requests to take annual leave during term weeks are reasonable and possible.40

[34] The AIS submits that the model clause contradicts the current Teachers Award provisions for the taking of annual leave because a request for annual leave in advance could not be granted as teachers must take annual leave only during non-term weeks. 41 It notes that while it does not have any in-principle objection to employees taking annual leave in advance the model clause would only cause confusion and disappointment when requests are not approved.42

[35] The IEU submits that the Commission in the June decision gave weight to an employer survey insofar as it showed workforce demand for annual leave in advance provisions, but notes no such survey was distributed in the school education sector. 43 It referred to the witness statement of Ms Maureen Shembrey in which Ms Shembrey stated that in over 40 years of working in school education she had never come across an instance of an employee requesting annual leave in advance.44

[36] The IEU contends ‘wholesale access to leave during the school term’ would significantly increase costs because schools would have to engage additional teachers. 45 It also argues the inclusion of the model clauses in the Award is not consistent with s.134(a) of the Act because the clauses are not relevant to the work performed and would have no work to do.46

4.2 Cashing out of annual leave (proposed clause 21.5) 47

[37] The AIS does not support the inclusion of the cashing out of annual leave model clause in the Teachers Award. 48 It submits that at the end of a school year, a teacher has taken the four week annual leave entitlement and such entitlement is deemed to have been taken during non-term weeks.49 It submits it is not possible for more than four weeks’ annual leave to accrue during any school year and therefore the model clause could never be operative.50

[38] The AIS contends that if the model clause was inserted, it would give the expectation that it is possible to cash out annual leave when it is not. 51 It further contends that while it does not have any in-principle objection to the concept of cashing out annual leave, the model clause has no work to do in the Teachers Award.52

[39] The IEU submits that the model clause would have no work to do because it is not possible for an employee to meet the requirement for a minimum accrual of four weeks’ annual leave remaining after the cashing out. Therefore, the clause should not be inserted.  53

4.3 Excessive annual leave accruals (proposed clause 21.6) 54

[40] The AIS submits the model clause providing for excessive annual leave accruals has no relevance to teachers employed under the Teachers Award because it is not possible to accrue excessive annual leave. 55 The current Award deems the four-week annual leave entitlement is taken during the year in which it accrues during non-term weeks.56

[41] The AIS notes that while it does not have any in-principle objection to the concept of dealing with excessive leave accruals, the model clause would not be used by employers or teachers. 57

[42] The IEU contends the model clause would not operate because it is not possible for six weeks of annual leave to accrue and therefore an essential precondition of the clause would not be met. It argued the model clause should not be inserted. 58

4.4 Evidence

(i) Mr Michael Carr

[43] The AIS provided a witness statement from Mr Michael Carr in support of its submissions. Mr Carr gave evidence he was currently employed as the Deputy Executive Director at the Association of Independent Schools of NSW (AISNSW). Prior to Mr Carr’s current employment, he was a Principal of three schools. 59

[44] Mr Carr gave evidence that the industry has a long-standing history of understanding that leave is taken during the summer holiday period at the end of term four each year. 60 Mr Carr claimed that granting annual leave in advance would be problematic for employers in terms of replacing teachers and managing disruption to students.61

[45] Mr Carr gave evidence that in his 40 years of experience of schools and with the AISNSW, he had never received a request from a teacher to take annual leave in advance. Mr Carr believed this is because teachers have the benefit of not being required to work during non-term time and because they are aware that taking leave in advance would have the effect of an unpaid period at the end of term four. 62

[46] Mr Carr gave evidence that the current Teachers Award does not facilitate the accrual of more than four weeks’ annual leave in a year therefore a provision for the cashing out of annual leave is redundant. 63 Mr Carr also claimed it has never been necessary to require teachers to take excessive accrued annual leave nor have teachers had the option of accruing excessive annual leave due to the operation of the current Teachers Award.64

(ii) Ms Maureen Shembrey

[47] The IEU provided a witness statement from Ms Maureen Shembrey in support of its submissions. Ms Shembrey gave evidence she was employed as the Principal’s Officer with the IEU. Prior to this role Ms Shembrey was a teacher in Catholic Education and a principal. 65

[48] Ms Shembrey gave evidence that teachers exhaust their leave as it accrues, and she was not aware of any teacher in a Victorian non-government school having carried over any leave from one year to the next. 66 Ms Shembrey also gave evidence that no teacher would be able to access a cashing out of annual leave provision because they cannot accrue more than four weeks’ leave.67

[49] Ms Shembrey gave evidence that almost all teachers will seek leave during term time for various reasons including relocation, emergencies and family events. In Ms Shembrey’s experience the ‘overwhelming majority’ of these will be requested as leave without pay. Ms Shembrey also gave evidence that in her experience, she has not received and has not heard of any requests for annual leave in advance. 68

[50] Ms Shembrey expressed a number of concerns about the proposed model clauses. This includes that the balance of teachers working long hours during school terms and receiving school holidays where they are not required to attend work would be disturbed, an expectation that paid leave can be accessed during term time in return for an equivalent period of leave without pay, and the possibility of additional costs due to replacing teachers. 69 Ms Shembrey also expressed a concern that the model clauses may affect school planning, emphasising long notice periods are important for the purposes of planning.70

4.5 Conference

[51] A conference was held on 23 February 2017 before Commissioner Johns. The purpose of the conference was to address particular issues in relation to the annual leave in advance term. The parties maintained their position that the term should not be included in the Teachers Award.

[52] The Commission put a scenario to the parties in which an employee becomes sick or required elective surgery during term time but did not have enough sick leave and therefore sought to access annual leave in advance. The IEU acknowledged this scenario was not impossible. 71 The AIS submitted there had never been a situation where annual leave can be taken in time other than non-term weeks72 and where employees have elective surgery they have it in non-term time or during term time and access personal/carer’s leave.73

[53] The AIS further submitted that if annual leave could be taken at times other than non-term time, a difficult situation would arise because employees may request to take personal/carer’s leave during a non-term week and this would be difficult to manage. 74 It also contended ‘double dipping’ may occur.75

4.6 Schedule B

[54] Schedule B to the Teachers Award contains provisions for teachers employed in an early childhood service which operates for 48 or more weeks per year including hours of work, rostering and overtime. At the 23 February 2017 conference the parties maintained their agreed position that the model terms should apply only to teachers employed in early childhood services operating for at least 48 weeks per year. 76 It was acknowledged there is potential for employees in this category to accrue leave and to take leave at a different time, in comparison to employees covered by the main body of the award, for whom there is not.77

5. Consideration

[55] Having considered the material submitted by all parties we have determined that due to nature of the education industry, including the particular leave arrangements for school teachers, the annual leave model terms should not apply to employees under the Teachers Award other than to teachers employed in early childhood services that operate for at least 48 weeks per year.

6. Next steps

[56] A draft determination has been prepared to insert the annual leave model terms into the Teachers Award to only apply to teachers employed in early childhood services that operate for at least 48 weeks per year. The determination will be published on the Commission’s website and interested persons are invited to comment on the draft determination. Written submissions should be sent to [email protected] by 4:00pm on Monday 8 May 2017. If no comments are received, the determination will be issued in final form.

VICE PRESIDENT

 1   [2015] FWCFB 3406

 2   [2015] FWCFB 5771

 3   [2016] FWCFB 3177

 4   [2016] FWCFB 3953

 5   [2015] FWCFB 8030

 6   IEU submission dated 26 October 2015 at 3

 7   (2014) 225 FCR 154 at [85]

 8   [2014] FWCFB 1788

 9   [2014] FWCFB 1788 at [23]

 10   [2017] FWCFB 1001 at [115]

 11   [2014] FWCFB 1788 at [36]

 12   [2016] FWCFB 3177

 13   See [2015] FWCFB 3406

 14   [2015] FWCFB 3406 at [414]

 15   [2015] FWCFB 3406 at [411]

 16   [2015] FWCFB 3406 at [414]

 17   [2015] FWCFB 3406 at [415]

 18   See [2015] FWCFB 3406

 19   [2015] FWCFB 3406 at [265]

 20   [2015] FWCFB 3406 at [312]

 21   [2015] FWCFB 3406 at [266]

 22   [2015] FWCFB 3406 at [266]

 23   See [2015] FWCFB 3406

 24   [2015] FWCFB 3406 at [190]

 25   [2015] FWCFB 3406 at [215]

 26   [2015] FWCFB 3406 at [169]

 27   Draft determination

 28   Revised draft determination

 29   AIS submission dated 26 October 2015 at 2.1-2.3

 30   IEU submission dated 26 October 2015 at 2

 31   IEU submission dated 26 October 2015 at 3

 32   IEU submission dated 26 October 2015 at 4

 33   IEU Submission dated 13 July 2015 at 8

 34   See Revised draft determination published 30 September 2015

 35   AIS submission dated 26 October 2015 at 5.8

 36   AIS submission dated 26 October 2015 at 5.2

 37   AIS submission dated 26 October 2015 at 4.2-4.3

 38   AIS submission dated 26 October 2015 at 4.3

 39   AIS submission dated 26 October 2015 at 5.3-5.4

 40   AIS submission dated 26 October 2015 at 5.4-5.5

 41   AIS submission dated 26 October 2015 at 5.6

 42   AIS submission dated 26 October 2015 at 5.7

 43   IEU submission dated 26 October 2015 at 9

 44   IEU submission dated 26 October 2015 at 9

 45   IEU submission dated 26 October 2015 at 11

 46   IEU Submission dated 13 July 2015 at 6

 47   See Revised draft determination published 30 September 2015

 48   AIS submission dated 26 October 2015 at 6.10

 49   AIS submission dated 26 October 2015 at 6.2

 50   AIS submission dated 26 October 2015 at 6.6-6.7

 51   AIS submission dated 26 October 2015 at 6.8

 52   AIS submission dated 26 October 2015 at 6.9

 53   IEU submission dated 26 October 2015 at 7

 54   See Revised draft determination published 30 September 2015

 55   AIS submission dated 26 October 2015 at 7.1

 56   AIS submission dated 26 October 2015 at 7.3

 57   AIS submission dated 26 October 2015 at 7.4

 58   IEU submission dated 26 October 2015 at 6

 59   Witness Statement of Michael Carr dated 26 October 2015 at 1-2

 60   Witness Statement of Michael Carr dated 26 October 2015 at 11

 61   Witness Statement of Michael Carr dated 26 October 2015 at 12

 62   Witness Statement of Michael Carr dated 26 October 2015 at 14

 63   Witness Statement of Michael Carr dated 26 October 2015 at 12

 64   Witness Statement of Michael Carr dated 26 October 2015 at 13-15

 65   Witness Statement of Maureen Shembrey at 1-2

 66   Witness Statement of Maureen Shembrey at 9

 67   Witness Statement of Maureen Shembrey at 10

 68   Witness Statement of Maureen Shembrey at 11-12

 69   Witness Statement of Maureen Shembrey at 14

 70   Witness Statement of Maureen Shembrey at 15

 71   Transcript 23 February 2017 at [PN21-22]

 72   Transcript 23 February 2017 at [PN26]

 73   Transcript 23 February 2017 at [PN37]

 74   Transcript 23 February 2017 at [PN42]

 75   Transcript 23 February 2017 at [PN44-48]

 76   Transcript 23 February 2017 at [PN55-63]

 77   Transcript 23 February 2017 at [PN64] and [PN81]

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