In determining a dispute about an agreement clause, the NSW Industrial Relations Commission has explained the scope and application of its arbitration and award making powers in circumstances where the parties have agreed to a provision, which expressly states that the Commission can arbitrate an unresolved issue.

This is relevant to employers with employees in the NSW state system. Where parties approach the Commission to deal with disputes, including about unresolved issues in agreements, this decision clarifies that the scope of the power to set conditions of employment, in most circumstances, rests in the Commission’s power to make or vary an award.

The issue in dispute

On 30 June 2020, the Local Government Engineers Association of New South Wales (LGEA) notified the Commission of an internal dispute between LGEA and the MidCoast Council (Council). The dispute concerning the rate of superannuation that some employees were promised following the amalgamation of the former MidCoast County Council into the MidCoast Council.

Historically, Council employees were entitled to 6% above the minimum statutory rate of superannuation contributions (i.e. a total rate of 15.5%). As part of those enterprise bargaining in 2018 and 2019, no agreement was reached about what superannuation rate would be payable when the statutory minimum rate was set to rise on 1 July 2021 from 9.5% to 10%. The point of difference was whether the rate of superannuation would absorb any increase in the minimum statutory rate or whether it would increase to remain 6% above it. In other words, would the increase of 0.5% to the minimum rate of superannuation be absorbed into the existing rate of 15.5%, or should the Council employees have their superannuation increased to 16%.

Because no agreement could be reached, the parties to the agreement deferred a final decision as to whether the rate of superannuation would be changed from 15.5% to 16%, and inserted the following clause into the Enterprise Agreement:

“An employee’s entitlement to 15.5% superannuation shall remain with the employee whilst they remain continuously employed with MidCoast Council. The matter of absorbability will be dealt with by the NSW Industrial Relations Commission by way of arbitration.”

The decision

On 1 July 2021, the statutory minimum rate of superannuation increased by 0.5%. The Enterprise Agreement permitted the Commission to deal with “the matter of absorbability” that negotiations could not resolve; the relevant question for the Commission was how to resolve that dispute.

Under the section 136 of the Industrial Relations Act 1996 (NSW) (IR Act), the Commission can arbitrate industrial disputes by:

  • making a recommendation or give a direction (subsection 136(1)(a));
  • make or vary an award (subsection 136(1)(b));
  • make a dispute order such as an ordering a person to cease or refrain from taking action  (subsection 136(1)(c)); and
  • make any other kind of order it is authorised to make under the IR Act (subsection 136(1)(d)).

The LGEA submitted that the parties intended to permit the Commission to arbitrate (as was plain from the words of the agreement). The LGEA further submitted that ultimately the Commission could make an order as to the rate of superannuation. Alternatively, LGEA submitted that the Commission may, in arbitrating the matter, make a direction about the appropriate superannuation to be paid.

Council submitted that the Commission was only permitted to make an award should it arbitrate the matter. This was significant because, as the LGEA accepted, arbitration would mean that the Commission would make an award in accordance with wage fixing principles which apply to the determination of fixing wages and conditions of employment.

Commissioner Muir heard the matter. The Commissioner held that there was no legislative basis upon which the Commission could make an order based on the intention of the parties as expressed under the Enterprise Agreement.  However, this order would only be limited to an order to require the parties to maintain the status quo, and there was no other power under the act to make the order sought by the applicant.

Commissioner Muir held that making such an order about the rate of superannuation would constitute an award, and the appropriate power to make an award would be under subsection 136(1)(b) of the IR Act, not subsection 136(1)(d).

Similarly, Commissioner Muir held that the power to issue a direction was ordinarily limited to administrative and facilitative matters, and did not extend to setting a rate of superannuation under an Enterprise Agreement.

The application of this decision to other disputes in the Industrial Relation Commission (IRC)

This decision is a useful explanation of the Commission’s power to resolve a dispute through arbitration is not so open and broad that the Commission can make orders affecting the parties’ rights and interests.

The power to arbitrate does not automatically extend to making directions or orders that are more procedural in nature, rather than recommendations. For example, the power to make an order or a direction includes:

  • an order for the parties to a dispute to maintain the status quo pending or to uphold prior commitments but does not extend to setting conditions of employment; and
  • a direction of an administrative or facilitative kind such as to attend a compulsory conference or to take steps to ensure publication and compliance with dispute orders made by the Commission.

In circumstances where the parties require more than an administrative or facilitative order or direction, they may be able to rely on the Commission’s power to make an award, in compliance with wage fixing principles.