Minimum Wage Legislation in Australia

Table of Contents

I Introduction

II Minimum Wages in Australia
A Development of minimum wages in Australia
1 Development prior to Work Choices
2 Work Choice reform
(a) Constitutional aspects
(b) The High Court's decision
3 Forward With Fairness reform
(a) Workplace Relations Amendment (Transition to Forward With Fairness) Act 2008
(b) Full implementation of the Forward with Fairness reform
B Minimum wages under the Work Choices reform
1 Work standards under Work Choices
(a) Australian Fair Pay and Conditions Standards
(b) Award standards
2 Types of minimum wages
(a) Standard federal minimum wage
(b) Special federal minimum wage
3 Australian Pay and Classification Scales
4 Guarantees of standard federal minimum wage and special federal minimum wage
C Minimum wage setting process
D Minimum wage institutions under the Work Choices
1 Australian Fair Pay Commission
(a) Australian Fair Pay Commission chair
(b) Australian Fair Pay Commission commissioners
(c) The director of the Australian Fair Pay Commission secretariat
2 Australian Industrial Relations Commission
E Compliance
F Minimum wages under Forward With Fairness
1 National Employment Standards
2 Modern award standards
3 Fair Work Australia

III Summary

Bibliography

I Introduction

The minimum wage is one of the predominant topics on the political agenda in Australia. Interestingly, its importance is not adequately reflected by the legal literature. Only a few thesis and essays try to investigate the legal underpinnings of the Australian minimum wage system. Most of the discussions are only focussed on the economic implications and results of minimum wages.^[1] But an only business perspective fails to look at minimum wages in a comprehensive way. The analysis of minimum wages from a legal point of view is necessary in order to understand the advantages and disadvantages of minimum wage systems.

Especially in Germany the Australian approach is often unknown and consequently neglected. But the Australian minimum wage system is one of the most innovative ones. In it's over a 100years old history it transformed several times and is even now in transition. A possible explanation for the transformation of the Australian minimum wage system may be its strong connection to sociological and economic influences. But this essay does not give a political statement in favour or disfavour of minimum wages in Australia. The author focuses on the legal implications of the Australian minimum wage system.

II Minimum Wages in Australia

Beside New Zealand, Australia is one of the first countries having implemented a system of minimum entitlements for employees.^[2] Consequently, the description of the Australian minimum wage system will start with its historical origins. Afterwards, the reader will be drawn to the current minimum wage provisions of the Work Choices reform in 2006 by the Howard government and the reform approaches by the Rudd government in 2008 and 2010.

A Development of minimum wages in Australia

The development of the Australian minimum wage can be divided into three major parts: The development prior to Work Choices^[3], the Work Choices reform and the Forward with Fairness reform.

1 Development prior to Work Choices

For the historical development prior to Work Choices it is important to mention the Harvester Judgement.^[4] It was the first decision concerning minimum entitlements of employees in Australia. Before Work Choices federal- or state awards set minimum wages.^[5] The underlying wage decisions connected to the awards were the so-called national wage cases.^[6] The most influential minimum wage setting body was the Australian Industrial Relations Commission^[7] making binding decisions by awards on the national wage cases.^[8] The minimum wages were adapted from time to time to either the particular needs of the employees or the general living costs, but always defined a minimum level of pay for low paid employees.

2 Work Choice reform

The Work Choices reform is very important for the setting of minimum wages, because prior to the Work Choices amendment of the Workplace Relations Act 1996 minimum wages have been set by awards but not by legislation.^[9] By the Work Choices reform, the Howard government for the first time introduced a legally determined minimum wage.^[10] The legislative intrusion in the former award wage setting process can be described as a radical change not only in the Australian wage setting system, but also in the whole Australian industrial relations system. The Work Choices reform also implemented an award rationalisation and simplification process being the domain of Australian Industrial Relations Commission. Prior to Work Choices the minimum wage setting systems have been separated between the federal level of the Commonwealth and the states' and territories' level. Although even nowadays under Work Choices some employees are still covered by state awards the majority of around 85 percent of all employees are now covered by the federal legislation of the Workplace Relations Act 1996.

(a) Constitutional aspects

Australia's constitution forms a federal system between the Commonwealth of Australia and the Australian states and territories. The legislative power is split between the federal and the states' level. The residual legislative power belongs to the states.^[11] The federal government has an exclusive legislative power if the Australian Constitution explicitly says so.^[12]

When the Work Choices reform has been enacted its constitutional validity has not been entirely clear. The Work Choices reform marked a historic shift of power from the states' level to the federal government. The crucial issue was whether the federal government had the legislative power to enact the federal Work Choices amendment covering about 85 percent of the employees in Australia. Some provisions of the Australian Constitution entitle the federal government to exercise legislative power in labour and industrial relations law matters. The Australian Constitution provides in Australian Constitution s 51 (xxxv) an exclusive power for the federal government to legislate conciliation, arbitration and dispute settlement in the Australian industrial relations matters. But this exclusive power is limited to matters "beyond the limits of any one State". Another exclusive power of the federal government is the external affairs power pursuing to Australian Constitution s 51 (xxix).^[13] It can be described as the most effective power to implement uniform and nationwide workplace standards.^[14] When enacting the Work Choices reform the federal government guided by prime-minister John Howard relied on the so-called "corporations' power" in Australian Constitutions s 51 (xx)^[15]. The corporations' power was the appropriate tool to implement especially the Australian Work and Conditions Standards, including minimum wages for a great majority of Australian employees.^[16]

(b) The High Court's decision

The severe reduction of the states' legislative powers has not been accepted especially by most of the Australian states. They doubted the constitutional validity of the implementation of an extended federal industrial relations system being based on the corporations' power of the Australian Constitution. The Australian states New South Wales, Queensland, South-Australia, Victoria and Western Australia challenged the Work Choices amendment in 2006 before the High Court of Australia. The Australian states have been supported amongst other by Australian Workers Union and the Unions of New South Wales.^[17] But a strong majority of the High Court of Australia's judges held by a five to two majority that the Work Choices amendment is constitutionally valid.^[18] The court came to the conclusion that the Workplace Relations Act 1996 in its amended form of Work Choices covers constitutional corporations and consequently is able to cover the interdependencies between their employers and employees.^[19]

3 Forward With Fairness reform

Despite the constitutional validity of the Work Choices reform, it has not been widely accepted in Australia. On the contrary, the Work Choices reform - as the major reform project of the Howard government - has been the crucial element deciding the 2007 federal elections and the clear victory of the labour party. The primary goal of the labour party was to wind back the Work Choices reform. The current Prime Minister Kevin Rudd emphasised in his pre-election campaign the necessity of an amendment of the Work Choices reform and the enactment of a new industrial relations system. The Rudd government intends to achieve this goal by its Forward With Fairness reform. The Forward With Fairness reform contains of two phasis. Firstly it consists of the amendment of the Workplace Relations Act 1996 in 2008 by the Workplace Relations Amendment (Transition to Forward With Fairness) Act 2008 and secondly of the full implementation of the Forward With Fairness reform in 2010.

(a) Workplace Relations Amendment (Transition to Forward With Fairness) Act 2008

On 28 March 2008 the Workplace Relations Amendment (Transition to Forward With Fairness) Act 2008 became law with royal assent on 20 March 2008. The Forward With Fairness reform keeps the Australian Fair Pay and Condition Standards, and consequently the determination of minimum wages, for the time being.^[20]

(b) Full implementation of the Forward with Fairness reform

The Forward With Fairness Reform will be fully implemented on 1 January 2010. After the Workplace Relations Amendment (Transition to Forward With Fairness) Act 2008 the second step in 2010 will comprise the following reform changes. Firstly, a key reform approach will be a stronger focus on collective bargaining after a longer period of individual bargaining during the work choices period. Secondly, the opportunity to get access to unfair dismissal laws will be extended. Thirdly, the importance of awards will be restored as the primary wage setting instrument. Fourthly, ten National Employment Standards (National Employment Standards) will be introduced in order to guarantee a minimum level of working conditions.^[21] Another crucial issue of the 2010 reform will be the extended coverage of Australian employees by the federal workplace relations system. Whilst the Workplace Relations Amendment (Transition to Forward With Fairness) Act 2008 has not modified the coverage of Australian employees, the 2010 reform will increase the number of covered employees to all Australian employees in the private sector.^[22]

B Minimum wages under the Work Choices reform

Generally speaking, a mixture of conciliation and arbitration tribunals, enterprise bargaining and a governmentally influenced wage setting process dominates the Australian industrial relations law system under Work Choices.^[23] Starting with a general introduction to the major Work standards under the Work Choices reform with a particular focus on the Australian Fair Pay and Conditions Standards and Award Standards the reader will get a closer look on the particular wage standards, especially the Australian minimum wages and the Australian Pay and Classification Scales. Finally, the legislative guarantees for minimum entitlements in Australia are examined.

1 Work standards under Work Choices

Generally speaking, the role of work standards is to give a particular level of protection for the employee and consequently produce a counterbalance to the contract between the parties of the employment contract.^[24] The Work Choices reform replaced the former system of work standards set by award standards and implemented a new system of work standards based on legislation.^[25]

Firstly, the attention of the reader will be drawn to the Australian Fair Pay and Conditions Standards as the major element of the Work Choices reform. Secondly, the author will examine the current role work standards set by awards.

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^[1] For the economic effects of minimum wages in Australia see for example Watson, Ian, 'Minimum Wages and Employment: Comment' (2004) 37 (2) The Australian Economic Review 166, 166-167; Butler, Joel, 'Minimum Wage Laws and Wage Regulation: Do Changes to a Minimum Wage affect Employment Levels? (2006) 29 (1) UNSW Law Journal 181, 181-182.

^[2] Internationales Arbeitsamt, Die Verfahren zur Festsetzung der Mindestlöhne (1927) 9. For early minimum wages in Australia see for example Pesl, Ludwig Daniel, Der Mindestlohn (1914) 99; Collier, Paul S., Minimum Wage Legislation in Australia (1915) 2116; International Labour Office, The Minimum Wage - An International Survey (1939) 6.

^[3] See Buchanan, John, Watson, Ian and Meagher, Gabrielle, 'The living wage in Australia', in Deborah M. Figart (ed) Living Wage Movements - Global perspectives (2004) 122, 124; McDonald, Allan, Unemployment Forever? - A Support Income System and Work For All (1995) 23-25. See also Stewart, Andrew, Stewart's Guide to Employment Law (2008) 176; Buchanan, John, Watson, Ian and Meagher, Gabrielle, 'The living wage in Australia', in Deborah M. Figart (ed) Living Wage Movements - Global perspectives (2004) 122, 123.

^[4] The first significant basic wage concept was introduced by Justice Higgens in the so-called Harvester Case, Ex parte HV McKay (1907) 2 CAR 1. See also Sawkins, D. T., The Linving Wage in Australia (1933) 12-13; Wheelwright, Karen, Butterworths Casebook Companions - Labour Law (2nd ed, 2003) 209; Anderson, George, Fixation of Wages in Australia (1929) 188; Foster, H. W., A Brief History of Australia's Basic Wage (3rded, 1975) 7; Creighton, Breen and Stewart, Andrew, Labour Law (4th ed, 2005) 51; Deery, Stephen J. and Plowman, David H., 'Australian Industrial Relations (3rd ed, 1991) 386; Evans, Simon et al, Work Choices - The High Court Challenge (2007), 331. It marked the beginning of wage decisions by the Court of Conciliation and Arbitration in the Australian Commonwealth. Interestingly, the Harvester Case was decided with reference to the Exice Tariff Act 1906 (Cth) and not the Commonwealth Conciliation and Arbitration Act 1904 (Cth), Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 291. Despite that, the Harvester Case was an important guideline in the determination of wage awards according to the Conciliation and Arbitration Act 1904 (Cth). The crucial issue was that the Court of Conciliation and Arbitration had to decide about the meaning of fairness and reasonableness of (minimum) wages. The Court of Conciliation and Arbitration held that "fair and reasonable" wages should be examined with reference to the "normal needs of the average employee" being a person "living in a civilized community", see also Australian Labour Law Reporter (27-041). The standard employee was assumed to be a family father, with a wife and three children, Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 291.

^[5] Edwards, Jane, The Workplace and the Law (1989) 8; Desch, Wolfram, Arbeitsrecht in Australien - Vom System der zentralisierten Zwangsschlichtung zum Enterprise Bargaining (2005) 122; Punch, Peter, Australian Industrial Law (1995) 255; Creighton, Breen and Stewart, Andrew, Labour Law (4th ed, 2005) 327; Brooks, Brian, Labour Law in Australia (2003) 107.

^[6] Fox, Carol B., Howard, William A. and Pittard, Marilyn J., Industrial Relations in Australia, Development, Law and Operation (1995) 390-391; Desch, Wolfram, Arbeitsrecht in Australien - Vom System der zentralisierten Zwangsschlichtung zum Enterprise Bargaining (2005) 121; Creighton, Breen, 'Modernising Australian Labour Law: Individualisation and the Shift from „Compulsory“ Conciliation and Arbitration to Enterprise Bargaining, in Roger Blanpain (ed) Changing Industrial Relations and Modernising of Labour Law, liber amicorum in honour of professor Marco Biagi (2003) 93, 95.

^[7] Australian Labour Law Reporter (27-026).

^[8] Buchanan, John, Watson, Ian and Meagher, Gabrielle, 'The living wage in Australia', in Deborah M. Figart (ed) Living Wage Movements - Global perspectives (2004) 122, 123.

^[9] Stewart, Andrew, Stewart's Guide to Employment Law (2008) 177; Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 290; König, Marco, Deregulierung und Flexibilisierung des Arbeitsrechts in Australien und Deutschland - Ein Vergleich (2001) 116.

^[10] See also Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 290; Stewart, Andrew, Stewart's Guide to Employment Law (2008) 177.

^[11] But the Australian state Victoria transferred most of its legislative powers in industrial relations matters to the federal government in 1996. The so-called "referral power" of the federal government covers almost every employee in Victoria, Australian Labour Law Reporter (220).

^[12] The exclusive legislative power is also described as "heads of power", Australian Labour Law Reporter (220).

^[13] See also Stewart, Andrew and Williams, George, Work Choices, What the High Court Said (2007) 23.

^[14] Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 277.

^[15] Those so-called "constitutional corporations" are "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth".

^[16] Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 277.

^[17] Australian Labour Law Reporter (220).

^[18] Australian Labour Law Reporter (220).

^[19] Australian Labour Law Reporter (220).

^[20] Australian Labour Law Reporter (105).

^[21]. Australian Labour Law Reporter (150).

^[22] Only the states' public workers will be still covered by the state's industrial relations regimes, Australian Labour Law Reporter (155). See also Munro, Paul, Peetz, David and Pocock, Barbara, 'Fair Minimum Standards' in Mordy Bromberg and Mark Irving (eds) Australian Charter of Employment Rights (2007) 74, 77.

^[23] Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 291.

^[24] See also Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 276.

^[25] Owens, Rosemary and Riley, Joellen , The Law of Work (2007) 276.