The important issue of whether Fair Work Australia (FWA) has the power to award retrospective wage increases when making an arbitrated Workplace Determination has been considered in two recent FWA decisions.
A Workplace Determination is essentially an industrial instrument that is made by FWA under the Fair Work Act 2009 (FW Act), as a result of the parties being unable to reach agreement on an enterprise agreement, and where bargaining (and any protected industrial action) has ended.
The FW Act provided clear guidance to FWA as to the scope of a Workplace Determination. Only four types of terms are to be included in a Workplace Determination: core terms (such as a nominal expiry date and provisions consistent with the National Employment Standards), mandatory terms (such as dispute resolution and consultation terms), agreed terms and any arbitrated terms regarding the matters at issue.
Typically, and as was the case in the recent Workplace Determinations in Qantas (with its baggage handlers) and Schweppes, the quantum of any wage increases is a matter at issue between the bargaining parties and will be arbitrated by FWA. Unions will, in almost all circumstances, seek that any wage increases made under the Workplace Determination be retrospectively paid, for example from the nominal expiry date of the existing agreement.
Historically, FWA and former Tribunals have held that, when arbitrating on wage issues, there must exist “special and compelling” or “exceptional” circumstances to justify any claim for retrospective wage increases (see HSU v Austin Health),and it is “more than usually undesirable to award retrospectivity” (see CPSU v Australian Protective Service).
Under the FW Act, there is no specific power for FWA to award retrospective wage increases in workplace determinations, as a workplace determination commences operation on the day it is made. In contrast, other provisions of the FW Act (such as in relation to the variation of modern awards) provide some scope for the specified date of the commencement of the variations to be before the date the award variation is actually determined.
However, the Full Benches in Qantas and Schweppes have taken divergent approaches to retrospective wage increases, in terms of whether “special and compelling” or “exceptional” circumstances are required, and also as to what constitutes a ‘retrospective’ wage increase.
In Qantas, the TWU sought increases in wages of 5% per annum from 1 July 2011 and 1 July 2012. Qantas sought 3% increases from the commencement of the Workplace Determination, with no retrospective payment.
While Qantas submitted that there were no exceptional circumstances warranting a retrospective wage increase, FWA took into account the fact that Qantas had agreed to a retrospective increase for its aircraft engineers, in a separate consent Workplace Determination. On this basis, FWA determined that the wage increases of 3% should apply from 1 July 2011. There was no specific consideration as to whether ‘exceptional circumstances’ existed, or whether this was still a relevant consideration.
In Schweppes, the Full Bench both relied on, and distinguished the decision in Qantas, by awarding a ‘front-loaded’ wage increase of 7% per annum, effective the first pay period after the Workplace Determination was made. This increase specifically incorporated a 3% increase to ‘compensate employees for the time period between the nominal expiry date of the 2010 Agreement and now.’ Oddly, the Full Bench also held that it was not persuaded that retrospectively was appropriate, even though the front-loaded wage increase essentially had the same, if not a more favourable, effect for employees.
These decisions leave open the question of whether exceptional circumstances are in fact required for a retrospective wage increase. Further, the distinction in Schweppes between ‘front-loading’ increases and retrospective payments seems tenuous (at best). However, if these approaches are maintained in future wage arbitrations, it will potentially remove a major bargaining chip for employers, who have previously considered that retrospective payments were not a ‘given’.