Application by The Australian Industry Group T/A Ai Group
[2024] FWC 2864
•16 OCTOBER 2024
| [2024] FWC 2864 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.160—Variation of modern award
s.157—Application to vary a modern award
Application by The Australian Industry Group T/A Ai Group
(AM2023/25)
TEXTILE, CLOTHING, FOOTWEAR AND ASSOCIATED INDUSTRIES AWARD 2020
[MA000017]
| Clothing industry | |
| DEPUTY PRESIDENT EASTON | SYDNEY, 16 OCTOBER 2024 |
Application to vary clauses 29.3(a), 29.3(b), C.3.1 and C.5.1 of the Textile, Clothing, Footwear and Associated Industries Award 2020 – award to be varied to correct errors and remove ambiguity or uncertainty.
On 20 October 2023, Australian Industry Group (Ai Group) lodged an application to vary clauses 29.3(a), 29.3(b), C.3.1 and C.5.1 of the Textile, Clothing, Footwear and Associated Industries Award 2020[1] (Award) pursuant to s.160, or in the alternative s.157, of the Fair Work Act 2009 (Cth) (FW Act).
The application concerns the shiftwork penalties prescribed by clause 29.3. In particular, whether the penalties apply per week or per shift.
Clause 29.3 provides as follows:
“29.3 Payment for shiftwork
(a) A shiftworker while on afternoon or night shift will be paid an additional 15% of the weekly award rate per shift for the classification concerned.
(b) A shiftworker while on permanent night shift will be paid an additional 30% of the weekly award rate per shift for the classification concerned.
NOTE: See Schedule C —Summary of Hourly Rates of Pay for a summary of hourly rates of pay including overtime and penalty rates.”
The shiftwork penalties in clause 29.3 are reflected in the summaries of rates of pay tables in clauses C.3.1 and C.5.1.
Ai Group seek the following changes to clause 29.3 (with consequential changes to C.3.1 and C.5.1) to make it clear that the shift penalties are to be calculated on the ‘ordinary hourly rate’ for each hour of shift work:
“29.3 Payment for shiftwork
(a) A shiftworker working an afternoon or night shift will be paid 115% of the ordinary hourly rate for each hour worked.
(b) A shiftworker working a permanent night shift will be paid 130% of the ordinary hourly rate for each hour worked.
NOTE: See Schedule C —Summary of Hourly Rates of Pay for a summary of hourly rates of pay including overtime and penalty rates.”
Ai Group seek that its proposed variations be made retrospectively, effective 1 February 2021, being the date that the relevant clauses as currently drafted, commenced operation.
Ai Group filed a submission on 7 February 2024.[2] The Construction, Forestry and Maritime Employees Union – Manufacturing Division (CFMEU) filed a submission in reply on 3 April 2024.[3] On 26 April 2024, Ai Group filed a submission in reply to the CMFEU.[4]
I held a hearing on Tuesday, 7 May 2024. Ai Group’s only witness, Rhiannon Carr, the Group Manager, People and Culture of Blundstone Australia Pty Ltd (an employer covered by the Textile Award) was not required for cross examination. Her witness statement was tendered into evidence.
Relevant award clauses
Clause 29.3 is set out above. It is a subclause of clause 29 which is titled “Shiftwork and penalty rates—General”. Clause 29 does not apply in the textile industry.[5] It applies to various other sectors covered by the Award including the clothing and footwear industries. This is relevant in tracing the origins of the clause to the relevant pre-reform award.
Clauses C.3.1 and C.5.1 set out summary tables of ordinary and penalty rates of pay for shiftworkers (other than in the textile industry). They reflect the shift penalties prescribed by clause 29.3(a) and 29.3(b). Clause C.3.1 relates to full-time and part-time employees and clause C.5.1 relates to casual employees:
C.3.1Full-time and part-time employees—shiftworkers other than in the textile industry—ordinary and penalty rates
Ordinary hours
Afternoon & night2
Permanent night shift2
Public holiday
% ordinary hourly rate1
% of ordinary weekly rate
% ordinary hourly rate1
100%
15%
30%
250%
$
$
$
$
Trainee
23.46
133.73
267.45
58.65
Skill level 1
24.10
137.39
274.77
60.25
Skill level 2
24.98
142.38
284.76
62.45
Skill level 3
25.80
147.06
294.12
64.50
Skill level 4
27.17
154.85
309.69
67.93
Skill level 5 and thereafter
28.87
164.57
329.13
72.18
1 Rates in table are calculated based on the minimum hourly rate, see clauses C.1.1 and C.1.2.
2 Payment is per shift in addition to applicable ordinary hourly rate.
C.5.1Casual employees—shiftworkers other than in the textile industry—ordinary and penalty rates
Ordinary hours
Afternoon & night2
Permanent night shift2
Public holiday
% ordinary hourly rate1
% of ordinary weekly rate
% ordinary hourly rate1
125%
15%
30%
275%
$
$
$
$
Trainee
29.33
133.73
267.45
64.52
Skill level 1
30.13
137.39
274.77
66.28
Skill level 2
31.23
142.38
284.76
68.70
Skill level 3
32.25
147.06
294.12
70.95
Skill level 4
33.96
154.85
309.69
74.72
Skill level 5 and thereafter
36.09
164.57
329.13
79.39
1 Rates in table are calculated based on the minimum hourly rate, see clauses C.1.1 and C.1.2.
2 Payment is per shift in addition to applicable ordinary hourly rate.
Legislative Framework
Section 160 and section 165
The power to vary an award to remove an ambiguity or uncertainty or correct error is contained in s.160 of the Act. It provides as follows:
“160 Variation of modern award to remove ambiguity or uncertainty or correct error
(1) The FWC may make a determination varying a modern award to remove an ambiguity or uncertainty or to correct an error.
(2) The FWC may make the determination:
(a) on its own initiative; or
(b) on application by an employer, employee, organisation or outworker entity that is covered by the modern award; or
(c) on application by an organisation that is entitled to represent the industrial interests of one or more employers or employees that are covered by the modern award; or
(d) if the modern award includes outworker terms—on application by an organisation that is entitled to represent the industrial interests of one or more outworkers to whom the outworker terms relate.”
Section 165 of the Act governs when a variation determination comes into operation. It provides as follows:
“165 When variation determinations come into operation, other than determinations setting, varying or revoking modern award minimum wages
Determinations come into operation on specified day
(1) A determination under this Part that varies a modern award (other than a determination that sets, varies or revokes modern award minimum wages) comes into operation on the day specified in the determination.
Note 1: For when a modern award, or a revocation of a modern award, comes into operation, see section 49.
Note: For when a determination under this Part setting, varying or revoking modern award minimum wages comes into operation, see section 166.
(2) The specified day must not be earlier than the day on which the determination is made, unless:
(a) the determination is made under section 160 (which deals with variation to remove ambiguities or correct errors); and
(b) the FWC is satisfied that there are exceptional circumstances that justify specifying an earlier day.
Determinations take effect from first full pay period
(3) The determination does not take effect in relation to a particular employee until the start of the employee’s first full pay period that starts on or after the day the determination comes into operation.”
Section 157 and section 134
Section 157 of the FW Act deals with the variation of modern awards. Section 157(1) provides as follows:
“157 FWC may vary etc. modern awards if necessary to achieve modern awards objective
(1) The FWC may:
(a) make a determination varying a modern award, otherwise than to vary modern award minimum wages or to vary a default fund term of the award; or
(b) make a modern award; or
(c) make a determination revoking a modern award;
if the FWC is satisfied that making the determination or modern award is necessary to achieve the modern awards objective.
Note 1: Generally, the FWC must be constituted by a Full Bench to make, vary or revoke a modern award. However, the President may direct a single FWC Member to make a variation (see section 616).
Note 2: Special criteria apply to changing coverage of modern awards or revoking modern awards (see sections 163 and 164).
Note 3: If the FWC is setting modern award minimum wages, the minimum wages objective also applies (see section 284).”
The modern awards objective is set out in s.134(1) of the FW Act as follows:
“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
(aa) the need to improve access to secure work across the economy; and
(ab) the need to achieve gender equality in the workplace by ensuring equal remuneration for work of equal or comparable value, eliminating gender‑based undervaluation of work and providing workplace conditions that facilitate women’s full economic participation; 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
(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.”
s.160 Application
Ai Group’s application is primarily made pursuant to s.160 of the FW Act and seeks to remove any ambiguity, uncertainty or correct an error in relation to the shift penalties prescribed by clause 29.3.
The principles applicable to an application under s.160(1) are well established. The Commission must identify an ambiguity, uncertainty or error before it can consider whether to exercise its discretion to vary the award.[6]
Deputy President Saunders summarised the various principles in dealing with a section 160 application to vary the Road Transport and Distribution Award 2020 to remove ambiguity or uncertainty as follows:[7]
“[11] Ambiguity exists when a provision in an award is capable of more than one meaning. The ambiguity may be apparent on the face of the award or may become apparent only when extrinsic evidence is adduced.
[12] The terms “ambiguity” and “uncertainty” are not synonyms. The ordinary meaning of “ambiguity” is “1. doubtfulness or uncertainty of meaning, 2. an equivocal or ambiguous word or expression”. The ordinary meaning of “uncertainty” is “1. not definitely or surely known; doubtful. 2. not confident, assured or decided. 3. not fixed or determined. 4. doubtful; vague; distinct”. Uncertainty may arise from the application of an unambiguous term to a particular set of circumstances. The distinction between patent ambiguity (linguistic ambiguity) and latent ambiguity (ambiguity in application) provides an illustration by analogy.
[13] Determining whether a provision in an award is ambiguous or uncertain is distinct from the task of identifying the true meaning of the provision. When an instrument such as an award is properly construed, there is only one correct meaning, notwithstanding that there may be ambiguity in the provision. It follows that it is not necessary for the Commission to interpret the award in order to reach a conclusion concerning the presence of ambiguity or uncertainty.
[14] If ambiguity or uncertainty is found in an award, the Commission may have regard to a range of factors in determining whether to exercise its discretion to vary the award in order to remove the ambiguity or uncertainty. There is no need for the Commission to feel constrained in the matters to which it may have regard in the exercise of its discretionary power under s 160 of the Act by the principles developed for the interpretation of awards. For example, the Commission may have regard to “industrial principles and general industrial merit considerations”. Other relevant matters may include the actual intention of the maker of the instrument (or of the interested parties) and the history of the provision as part of the “equity, good conscience and the merits” of the matter. This may be contrasted with the process of construing an award where the actual subjective intent of the makers of the instrument is irrelevant. That is because the process of interpretation is directed to the proper construction of what the instrument says, not what it was meant to say.”
[Footnotes removed]
Ambiguity and uncertainty
Ai Group submit that clause 29.3 is ambiguous as it is capable of more than one meaning. For example, it is reasonably arguable from the plain text of clause 29.3(a) that it requires the payment of:
1. 15% of the weekly rate, for each shift worked (First Interpretation); or
2. 15%, of the weekly rate for each shift worked (Second Interpretation).
That is; 15% of the portion of the weekly rate attributable to each shift
worked.[8]
Ai Group submit that the second interpretation is preferred.
CFMEU on the other hand, submit that the first interpretation is correct and that it is the only interpretation available.
The Fair Work Ombudsman has also adopted the first interpretation.[9]
It is useful to set out the various factors put forward by Ai Group in support of their contention that the provisions are ambiguous:[10]
“77. First, two of the key industrial organisations who represent employers and employees covered by the Award are in dispute as to how the Award is to be interpreted. It is our understanding that the CFMEU considers that the First Interpretation is correct.
78. Ai Group’s position is more nuanced. It is our view that clause 29.3 of the Award is ambiguous and / or uncertain, or in the alternate, it contains errors. Nonetheless, having regard to the history preceding and context surrounding the Impugned Clauses, we consider that the Second Interpretation should be preferred and that it reflects the manner in which the provisions were intended to operate. We refer to paragraph 72 of our submission in this regard.
79. Second, the Fair Work Ombudsman has also adopted the First Interpretation in the pay guide it published effective 1 July 2023. That is, it indicates that the relevant shiftwork penalties constitute 15% of the minimum weekly rate and are for each shift worked.
80. Third, the approach adopted in the Second Interpretation is broadly consistent with that utilised in clauses 30.3(a) and 30.3(b) of the Award; which require the payment of a shift penalty to certain employees in the textile industry. That shift penalty is to be calculated as a percentage of a proportion of the minimum weekly rate of a specified classification level. This tends to support the First Interpretation.
81. Fourth, the corollary of that proposition might also be said to be true. On one view, if it were intended that clauses 29.3 and 30.3(a) – 30.3(b) are to operate in the same way, they would arguably have been drafted in the same terms.
82. Fifth, the practical application of the First Interpretation vis-à-vis the Second Interpretation results in vastly different outcomes. This is demonstrated by the table below, which sets out the total quantum of the penalty that would be payable for an afternoon shift of 7.6 hours (i.e. the amount that would be payable in addition to the base hourly rate owing for the shift):
Classification Level
(General Rates)First Interpretation ($) Second Interpretation ($) Trainee 128.90 25.78 Skill level 1 132.42 26.48 Skill level 2 137.24 27.45 Skill level 3 141.75 28.35 Skill level 4 149.25 29.856 Skill level 5 and thereafter 158.61 31.72
83. The quantum of the shift penalties delivered by the application of the First Interpretation is wildly out-of-step with the shift penalties payable pursuant to clauses 30.3(a) – (b) in respect of employees in the textile industry. Those provisions require the payment of $27.45 or $54.89, respectively, per shift. This is akin to the amounts payable per the Second Interpretation of clause 29.3.
84. This discrepancy between the approaches adopted in respect of the textile industry and other sectors covered by the Award is, in our submission, inexplicable and anomalous. The disutility associated with performing shiftwork in the textile industry relative to other industries covered by the Award is not so different as to justify the enormous differential between the amounts payable under the respective clauses if the First Interpretation is adopted.
85. This proposition tends to support the Second Interpretation as the more tenable one.
86. Sixth, the outcome of the First Interpretation is also at odds with the approach taken generally in modern awards. This can be seen from our analysis at Attachment C, which summarises relevant provisions found in all modern awards that contemplate afternoon, night and / or permanent night shifts (as does clause 29 of the TCF Award).
87. On a shift that is 7.6 hours in length, an employee covered by the Award would be paid anywhere between $40 (i.e. a trainee on afternoon shift) and $70 per hour (i.e. a level 5 employee on permanent night shift), according to the First Interpretation. As can be seen from our analysis, this is significantly higher than the amounts generally payable in other awards. The same conclusion would be reached if the analysis were limited to the shift penalties or premiums payable in other awards. The analysis shows that typically, employees are entitled to a penalty of 15% - 30% for shiftwork, applied to the applicable hourly rate, for each hour worked on the relevant shift.
88. This, coupled with the absence of any apparent justification for the First Interpretation tells strongly against it.
89. Seventh, the First Interpretation would deliver the same quantum of shift penalty for each shift, irrespective of the length of the shift. This is to be contrasted with the Second Interpretation, which would result in a variable amount being payable, depending on the duration of the shift worked. On that reading, the clauses facilitate the calculation of the shift penalties on a proportionate basis. Therefore, on one view, the Second Interpretation better reflects the intention underlying the shift penalties, which is to compensate employees for the disutility of working shifts; on the basis that those disutilities are experienced to a greater extent where the employee performs a longer shift. Again, this approach would be consistent with the approach found in the vast majority of awards that contain a shiftwork regime.
90. Eighth, the reference to the ‘weekly award rate’ in clause 29.3 is also unclear. It is not a defined term or used elsewhere in the Award, except in relation to accident pay. It is also different to the terminology used in Clauses C.3.1 and C.5.1 – that being the ‘ordinary weekly rate’.”
[Footnotes removed]
CFMEU submit that there is no ambiguity and that clause 29.3 when read objectively and in context, clearly and unequivocally requires payment per shift.[11] They submit that it is not reasonably arguable that there’s another interpretation.
CFMEU submit that this view is reinforced when considering the context of the whole Award. For example, clause 30.3 which sets out penalties for shift workers in the textile industry and has a very different formulation, makes it very clear that the penalty rate for each shift is 15 per cent:
(a)A shiftworker, other than a day shiftworker, is entitled to a penalty loading for each shift worked of $27.45 (15% of one-fifth of the weekly rate for a Skill Level 2), in addition to their ordinary rate of pay.
(b)A shiftworker engaged on permanent night shift is entitled to a penalty loading for each shift worked of $54.89 (30% of one-fifth of the weekly rate for a Skill Level 2), in addition to their ordinary rate of pay.
The CFMEU submit that the footnotes in clauses C.3.1 and C.5.1 put beyond doubt that the shift penalty payment is per shift.
Ai Group submit that a payment ‘per shift’ in clause 29.3 is ‘wildly out of step’ with the shift penalties payable in the textile industry and that this discrepancy is inexplicable and not justified by industry differences.[12]
Uncertainty
Ai Group submit that the relevant clauses are uncertain as their meaning is not ‘definitely known’ or ‘perfectly clear’, but rather, is ‘doubtful’. They submit that their submissions extracted above, highlight the anomalous results that flow from the First Interpretation. The ‘absurdity and apparent lack of justification for the significant windfall gain’ renders the provisions uncertain.[13]
The CFMEU submit that Ai Group’s submission is “undeveloped and misunderstands the established meaning of ‘uncertainty’”.[14] The CFMEU submit that there is no uncertainty in the relevant clauses.
Error
If the Commission is not satisfied that the Award contains an ambiguity or uncertainty, Ai Group submits in the alternative, that the relevant clauses contain an error.
A Full Bench of the Commission observed in the context of a review of superannuation provisions that “[e]rror will be demonstrated if some sort of mistake is shown, in that a provision of the award was made in a form which did not reflect the tribunal’s intention.”[15]
Ai Group submit that mistakes made during the 4 yearly review of modern awards and other subsequent proceedings, including an award variation on the Commission’s own motion, have resulted in the relevant clauses being in a form that is not consistent with the Commission’s intention.
Ai Group submit that the Commission’s intention was that the relevant clauses reflect the operation of the Textile, Clothing, Footwear and Associated Industries Award 2010 (2010 Award) and that due to mistakes made, they do not do that.
The 2010 Award was created during the Part 10A Award Modernisation process. The parties agree that clause 35 of the 2010 Award,[16] was based on and adopted substantively the text in clauses 29.3.1 and 29.3.2 of the pre-reform Footwear Industries Award 2000 (Footwear Award).[17]
Ai Group submit that the Footwear Award and the 2010 Award required payment of shift penalties on a weekly basis, not per shift.
Further, Ai Group submit that weekly payment of the shift penalty ‘is consistent with widespread industry practice and understanding as to how these provisions were to be interpreted and applied’.[18] They provide examples of this at Attachment C to their submission and cite the witness statement of Ms Carr in support.
The CFMEU submit that the evidence of Ms Carr does not provide a proper evidentiary basis for the submission and submit that Ai Group have “failed to adduce any evidence about any widespread industry practice and understanding as to how clause 35 was interpreted and applied”.[19]
Ai Group submit that the Commission did not intend nor expressly decide to change the meaning of the 2010 Award in relation to the relevant clauses, nor was it sought by any party during relevant proceedings.
Rather, inadvertently, through the introduction of footnotes into what are now clauses C.3.1 and C.5.1[20] in an exposure draft during the 4 yearly review, and then subsequently through the variation[21] of clause 29.3 of the Award to align it with clauses C.3.1 and C.5.1, the Award came to expressly state that shift loadings are to be paid for each shift worked.
Ai Group submits that the errors were made in the following order:
(i)The footnote now found in clause C.5.1, as proposed by the Commission during the 4 yearly review in an exposure draft published on 4 November 2015, incorrectly described the effect of the substantive award term. It stated that the shift penalty applied to casual employees per shift.
(ii)Despite opposition from the TCFUA, the aforementioned footnote was replicated at what is now clause C.3.1, in respect of permanent employees. Thus, the scope of the error was extended.
(iii)After the 4 yearly review, clause 29.3 of the Award was varied to align with the aforementioned footnotes, which were in fact incorrect. Thus, the scope of the error was again extended.[22]
Accordingly, Ai Group submit that the Commission should exercise its discretion to vary the award as proposed to remove the error and to ensure that the Award meets the modern awards objective.
CFMEU on the other hand, submit that the Footwear Award and the 2010 Award required payment of shift penalties per shift, not weekly.
Clause 29.3 of the Footwear Award is set out below:
"29.3 Afternoon or night shift allowances
29.3.1Subject to 29.3.2, a full time shift worker whilst on morning, afternoon or night shift will be paid an additional amount of 15% of the weekly award wage for the classification concerned.
29.3.2An employee engaged on permanent night shift duties will be paid an additional amount of 30% of the weekly award wage for the classification concerned.
29.3.3A full time shift worker who works on a morning, afternoon or night shift which does not continue for at least 5 successive mornings, afternoons or nights or for at least the number of ordinary hours prescribed as a week's work will be paid an additional amount of 50% of the weekly award wage for the classification concerned.
29.3.4A shorter shift of adult employees may be worked on any shift other than the day shift, by mutual agreement between an employer and his employees. Payment for such work will be calculated in accordance with this subclause on a pro-rata basis related to the time actually worked as a proportion of the ordinary weekly hours.”
In support of its contention that the shiftwork penalties in the Footwear Award were payable per week, Ai Group submit that no provision of the Footwear Award prescribed hourly rates of pay. They submit that the use of the words ‘an additional amount’ and the application of the provision to full-time employees only, as well as the weekly award wage provided for in clause 19.1.1 strongly suggest that the penalty for shiftwork was to be paid in respect of a week.
Ai Group further submit that the reference to a ‘shorter shift’ in clause 29.3.4 which was paid on a pro-rata basis as a proportion of the ordinary weekly hours, suggests that the shift penalties in clauses 29.3.1-29.3.3 constituted weekly amounts. Clause 29.3.4 is a contextual indicator that supports the proposition that the 15 per cent was payable per week, not per shift in that award.[23]
Ai Group further submit that a written submission made by the TCFUA (now amalgamated with the CFMEU), following the publication of the exposure draft, indicated that it understood that the shift penalties would be payable on a weekly basis, not per shift.
At that time, the TCFUA submitted in response to the exposure draft, that ‘the clothing shift penalty has been reduced from 22.5%’ and that it ‘should be reinstated to prevent disadvantage…’[24]
Given the TCFUA’s submission proceeds on the basis that the proposed clause in the exposure draft would provide an entitlement less than that in the pre-reform clothing award, Ai Group submit that ‘it appears that the union understood that the proposed provision would result in an employee receiving 15% of the weekly award wage per week.’[25]
In relation to the ‘shorter shift’ argument, the CFMEU submit that this submission should be rejected as it is unclear what a ‘shorter shift’ refers to and therefore clause 29.3.4 does not assist the Commission.
An exposure draft of the 2010 Award was published in September 2008 as part of the Award Modernisation Process. The 2010 Award,[26] when made, contained substantively the same provision as the exposure draft:
“35. Payment for shiftwork
35.1A shiftworker while on afternoon or night shift will be paid an additional amount of 15% of the weekly award wage for the classification concerned.
35.2A shiftworker while on permanent night shift will be paid an additional amount of 30% of the weekly award wage for the classification concerned.”
As with the Footwear Award, the 2010 Award contained a ‘weekly award wage’.[27] It did not contain ‘hourly rates of pay’.
Insertion of footnote into C.4.1 (now C.5.1)
During the 4 yearly review of modern awards, the 2010 Award was redrafted in plain language to make it simpler and easier to understand. This process was not intended to make any substantive changes to modern awards.[28]
As part of the redrafting of the Award, summaries of hourly rates of pay were included at Schedule C, setting out summaries of shift penalties for permanent and casual employees, expressed as percentages of the ‘ordinary weekly rate’.
An exposure draft was published on 4 November 2015.[29] This was the second version of the exposure draft published for the Award but the first time that a schedule was attached with summaries of shift work rates payable. The table relating to casual shiftworkers (other than in the textile industry) was at C.4.1 (now C.5.1 in the current award).
A footnote to the table in C.4.1 expressed:
“1 Payment per shift in addition to applicable minimum hourly rate.”
[Underlining added]
Ai Group submit that this inclusion of a footnote by the Commission was the first time that the Award expressly indicated that shift penalties prescribed by clause 29.3 were payable for each shift. That is, an employee was entitled, for example, to 15% of the weekly rate for each afternoon shift.
Ai Group submit that the footnote at C.4.1 was not proposed by any of the parties in submissions prior to publication of the exposure draft, nor was it dealt with in any Commission decisions.
The CFMEU submit that the inclusion of the footnote expressing ‘per shift’ confirmed what had been the case under the predecessor awards, that is, that the relevant shift penalties were to be paid per shift, not weekly.
Replication of footnote to C.2.2 (now C.3.1)
The table in clause C.2.2 (now C.3.1 in the current award) relating to shift work rates for full-time and part-time shiftworkers (other than in the textile industry) contained a footnote in the heading of the table relating to ‘Afternoon & night’ and ‘Permanent night shift’ but there was no corresponding text under the table to explain the footnote.
Ai Group submit that in response to the exposure draft, they pointed to the wording used in C.4.1 and submitted that wording was missing from C.2.2.
Ai Group submit that the insertion of the proposed footnote was opposed by the TCFUA and that the Commission erroneously considered the issue ‘resolved’ and replicated the footnote from C.4.1 into C.2.2.
The CFMEU however submit that the TCFUA were not opposed to the insertion of the footnote. Rather, they had opposed a different issue being the different methods of calculating shift loadings in the textile industry compared to the non-textile industries.
The CFMEU submit that accordingly, the Commission correctly took the view that the issue of insertion of the footnote had been resolved and why there was no express consideration.
A determination finalising the technical and drafting review of the Award was issued on 4 December 2020, operative from 1 February 2021.[30]
The Award contained a footnote to the tables in clauses C.3.1 and C.5.1 expressing that the relevant penalty was payable for each shift worked:
“2 Payment is per shift in addition to applicable ordinary hourly rate.”
Clause 35 was re-numbered and redrafted as clause 29.3:
“29.3 Payment for shiftwork
(a)A shiftworker while on afternoon or night shift will be paid 115% of the weekly award rate for the classification concerned.
(b)A shiftworker while on permanent night shift will be paid 130% of the weekly award rate for the classification concerned.
NOTE: See Schedule C – Summary of Hourly Rates of Pay for a summary of hourly rates of pay including overtime and penalty rates.”
Ai Group submit that the footnotes reflected errors that were made through the plain language redrafting process and that they were at odds with the substantive clause 29.3. Neither the substantive language of clause 29.3 nor the 2010 Award had expressly stated that the shift penalties were payable for each shift.
The CFMEU submit that the footnote did not change the meaning of the relevant clauses, but confirmed the existing meaning.[31]
In relation to ‘intention’, the CFMEU submitted at the hearing that if the “Commission made it clear that its intention was to change a term in a particular way, and it put that to the parties, so it's clear, and it's an objective fact that that was correct, and then it went ahead and did that, that there could not be an error.”[32]
Ai Group submitted in response that CFMEU’s submission disregards the nature of the process that the Commission was required to carry out during the 4 yearly review. Although there were occasions when closer examination of certain provisions as to the merits were required, at no point did the Commission or the parties flag that consideration was being given to how the relevant provisions operated.[33]
Amendment to clause 29.3
After the completion of the 4 yearly review, the Commission commenced proceedings on its own motion to correct an error in the Award.[34] In a Statement of 12 May 2021, the Commission observed:
“[2] An error has been identified concerning the expression of the entitlements for the afternoon and night shift and the permanent night shift in clause 29.3 of the Award, being described as 115% and 130% of the weekly award rate, respectively. This is inconsistent with the method of calculating payments applied for those same shifts in clauses C.3.1 and C.5.1 of the Award. The calculation method set out in clauses C.3.1 and C.5.1 is 15% or 30% of the ordinary weekly rate per shift in addition to whatever payment would be received for ordinary hours. [35]”
The Commission continued:
“[5] The ‘error’ was introduced into the Payment for shiftwork provision in the Exposure Draft published on 4 November 2015 and also appeared in the Exposure Draft published on 29 January 2020. The error was transferred into the 2020 Award which became operative on 1 February 2021.”
[Footnotes removed]
The Commission proposed to address the identified error as follows:
“[10] My provisional view is that the wording of the Payment of the shiftwork provision in clause 29.3 of the Award is incorrect and inconsistent with clauses C.3.1 and C.5.2 and constitutes an error for the purposes of s.160 of the Act.
[11] I propose that clause 29.3 be amended as follows:
(a) A shiftworker while on afternoon or night shift will be paid an additional 15%
115%of the weekly award rate per shift for the classification concerned.(b) A shiftworker while on permanent night shift will be paid an additional 30%
130%of the weekly award rate per shift for the classification concerned.NOTE: See Schedule C—Summary of Hourly Rates of Pay for a summary of
hourly rates of pay including overtime and penalty rates.[36]”
A decision and determination were issued on 31 May 2021, giving effect to the proposed changes, operating retrospectively from 1 February 2021. Thus, clause 29.3 was aligned with the clauses C.3.1 and C.5.1.
Ai Group submit that it appears that the Commission (and Ai Group) “were not conscious of, and did not intend, the potential implications of the insertion of the words ‘per shift’” in clause 29.3, that is, that the shift penalties would be payable for every shift worked.
CFMEU submit that the statement and decision in this matter make Ai Group’s submission that it was not conscious of the potential implications entirely unsustainable. It was not an error. Rather, the current award lines up entirely with the Commission’s intention.
The CMFEU submit that an error did occur during the 4 yearly review and that it was corrected by the Commission on its own motion. The error related to clause 29.3 referring to 115 per cent and 130 per cent of the award rate. That error was corrected.
The CFMEU submit that there is no error in the relevant clauses and there is no basis for the Ai Group’s submission that the amendments made to the relevant clauses did not reflect the Commission’s intention. In fact, they submit that the Ai Group supported those very changes.
Ai Group submit that the extent to which it did not identify the error adopted in the relevant clauses during proceedings is regrettable but does not undermine its arguments put forward in this matter, or alter the necessity to rectify the error.
The CFMEU submit that the Applicant has failed to establish the jurisdictional pre-requisite of an ambiguity, uncertainty or error. If, however, the Commission is satisfied that an ambiguity, uncertainty or error exists, it should exercise its discretion and decline to make the proposed variation.
Section 157 Application
If the Commission does not find that the relevant clauses are ambiguous, uncertain or erroneous, Ai Group submit that it should vary the Award as proposed, pursuant to s.157 of the FW Act ‘on the basis that the Award, in its present state, does not achieve the MAO’ (modern awards objective) set out in s.138 of the FW Act.
The CFMEU submit that the Commission should not grant the proposed variation pursuant to the s.157 application as the Applicant has not established that the variations are ‘necessary’ to achieve the modern awards objective.
CFMEU further submit that Ai Group has failed to advance “a proper evidentiary case and proper argument” in support of the proposed variations.[37]
Retrospective variations
Ai Group submit that the Commission should vary the relevant clauses as proposed, with effect from 1 February 2021.
In other matters, “the Commission has been satisfied that exceptional circumstances exist where there is ambiguity or uncertainty surrounding the meaning of award provisions and a risk of future litigation should the variation not be made retrospectively”.[38]
For example in the Horticulture Award Decision the Full Bench stated:[39]
“[170] For the following reasons, we are satisfied that there are “exceptional circumstances” that warrant the proposed variation to operate retrospectively from the date of commencement of the Horticulture Award, namely, 1 January 2010:
…
(b) The evidence demonstrates that many employers in the horticulture industry have been applying the Horticulture Award to work undertaken at washing, grading and packing facilities, regardless of whether any produce is grown at the site on which the facility is located. Absent retrospective operation of the variation, we are satisfied there will inevitably be disputation and likely litigation over whether producers have during the past almost eight years (subject to limitation periods) being making underpayments to workers in their packing facilities. Such disputation, litigation and potential back pay orders has the potential to have a significant impact on the viability and/or sustainability of a number of producers in the horticultural industry.”
Deputy President Saunders also considered the meaning of ‘exceptional circumstances’ in an application to vary the Road Transport and Distribution Award 2020:[40]
“[207] The following principles are relevant to determining whether “exceptional circumstances” exist within the meaning of s 165(2) of the Act:
·What will amount to “exceptional circumstances” is intrinsically incapable of exhaustive statement.
·Exceptional circumstances are circumstances that are out of the ordinary course, unusual, special or uncommon but the circumstances themselves do not need to be unique nor unprecedented, nor even very rare. To be exceptional, a circumstance “cannot be one that is regularly, or routinely, or normally encountered”.
·Exceptional circumstances may include a single exceptional matter, a combination of exceptional factors, or a combination of ordinary factors which, although individually of no particular significance, when taken together can be considered exceptional.
[208] I am satisfied that there are exceptional circumstances in this case by reason of a combination of the following factors:
(a)The long industrial history of provisions such as clause 22.10 of the RTD Award supports the Short Shift View.
(b)The Short Shift View accords with my opinion as to the proper construction of clause 22.10 of the RTD Award. As a result, I do not consider that there will be any loss of accrued rights by employees as a result of the variation determination having retrospective operation.
(c)Varying clause 22.10 of the RTD Award with retrospective effect will quell present disputation between Toll and the TWU, as well as avoid future disputation and litigation in the road transport and distribution industry relating to shifts worked by employees prior to the date on which the determination is made. I consider that such future disputation and litigation is reasonably likely to arise if the variation is not made with retrospective effect. I have made that assessment because the TWU clearly has a strong view about clause 22.10 of the RTD Award which is different from the Short Shift View and given the long industrial history of the provision and similar provisions, together with the advice provided by Ai Group to its members and the Fair Work Ombudsman’s publication in relation to a similar provision in the Manufacturing Award, I consider it likely that employers (other than Toll) in the road transport and distribution industry have been paying their employees in accordance with the Short Shift View.
[209] In my opinion, these circumstances are not regularly, routinely, or normally
encountered; they are out of the ordinary course.”
Ai Group submit that exceptional circumstances exist. There may be uncertainty as to the meaning of the relevant clauses between the period 1 February 2021 and the date the variation commences operation.
Retrospective variation would diminish the risk of future disputes about the meaning of the relevant clauses from 1 February 2021 as well as exposure to potential non-compliance. Such an outcome would not be fair to employers and would potentially impose significant employment costs.
Ai Group submit that these circumstances are particularly relevant given the industry practice is for shift penalties to apply weekly.
The CFMEU submit that Ai Group have failed to establish exceptional circumstances and that the decisions referenced by the Ai Group are ‘entirely distinguishable’ and of no assistance.
The CFMEU submit that the Ai Group’s reasons are not supported by probative evidence. Ai Group submit that all of the propositions advanced by them (except in relation to ‘industry practice’) do not rely on factual propositions that need to be made out through evidence.
Ai Group submit that it has not been feasible to call further evidence noting the serious practical challenges associated with employers providing evidence in a proceeding of this nature and the serious ramifications that may follow if the CFMEU’s interpretation is correct. Ai Group also observe that the CFMEU has failed to call any evidence including in relation to how the Award is being applied in practice.
Transitional arrangements
The CFMEU seeks to be heard on appropriate transitional provisions if the Commission decides to vary the Award as sought pursuant to the s.157 application.
Ai Group submits that if the Commission considers transitional provisions to be necessary then it too should be afforded an opportunity to be heard.
Consideration
I am satisfied that, at the very least, there has been an error arising from the Award Modernisation process and the Four Yearly Review of Modern Awards. Ai Group’s submissions regarding the error have been set out in long form at [39]-[65] above and after reviewing the materials I accept what the Ai Group says to be correct.
The shiftwork provisions in earlier iterations of the Award contemplated employees performing shift work on a weekly basis, meaning employees worked the same kind of shift for a whole week at a time. The shift penalties for full-time employees were expressed as a weekly amount, that is by reference to the weekly rate of pay, which is consistent with employees working shiftwork over the whole working week. The percentages used to calculate afternoon and night shift penalties were within a standard range: 15% and 30% respectively.
As can be seen from the materials, in an exposure draft in 2015 a new proposed table was inserted in the Summary of Hourly Rates of Pay schedule of the Award for casual shift workers. The proposed table included a footnote that referred to an allowance payable per shift. Ai Group and the CFMEU do not agree on whether this proposed footnote properly recorded the entitlement for part-time and casual employees because the previous award provisions were not explicit about these matters. I do not need to resolve this dispute.
In subsequent years a footnote was added to the proposed table in the summary schedule for full-time employees to the same effect: that the allowance be paid to full-time employees on a per shift basis. The terms of the shift work provisions in the body of the Award did not materially change at this time.
In 2020 the Award was varied to include Summary of Hourly Rates of Pay tables in the wages schedule of the Award that contained footnotes that referred to shift allowances being payable per shift - calculated by reference to the award weekly rate. At this time clause 29.3 of the Award did not refer to shift allowances being payable per shift.
In 2021 clause 29.3 was further varied by the Commission on its own motion to correct an error or anomaly. The references to percentages in clause 29.3 were changed from an obligation to pay 115% and 130% of the award weekly rate to an obligation to pay an additional 15% and 30%.
This change to how the percentages were expressed is not controversial but clause 29.3 was varied at the same time to state that the allowance (calculated by reference to the weekly wage) is to be paid “per shift.” This variation is consistent with the footnotes in the Summary of Hourly Rates of Pay table inserted the year before and, in effect, completed the loop of changing the shift allowances from an amount per week to an amount per shift.
The rationale for inserting the reference to “per shift” is apparent from the published reasons in 2021: to make the terms of clause 29.3 consistent with the wages schedule.[41]
However I am satisfied that this material change was not intended – either in 2020 when the footnotes were inserted in the schedule or in 2021 when the award clause was varied to align with the schedule.
I am satisfied that the form of the award provisions do not reflect the tribunal’s intention.[42] There is no indication in any of the materials that the parties or the Commission intended to effect a fourfold or fivefold increase in the shift penalties. Such a change would have been conspicuously inconsistent with the nature of the Four Yearly Review Process. The history of the Award does not reveal any deliberate expansion of the penalty rates for such workers, nor any rationale for doing so.
The literal meaning of the words require an employer to pay an amount per shift calculated by reference to a weekly figure. On the CFMEU’s interpretation employees would receive significantly more than other employees covered by the same Award and also more than award covered employees generally.
The afternoon shift loading is almost double time on the CFMEU’s interpretation, which, in context is abnormal. As Ai Group submitted, the loadings are wildly out of step with the comparable penalties for textile workers under the same award.
I do not accept the CFMEU submission that the Footwear Award required payment of shift penalties on a per shift basis for full-time employees. The previous provisions are reproduced at [42] above and quite clearly contemplated employees working at least five successive shifts of morning, afternoon or night[43] and correspondingly receiving shift penalties calculated on a weekly basis. The percentage varied according to whether at least 5 consecutive day, afternoon or night shifts were worked (either 15% or 50%) and also according to whether an employee worked permanent night shift (30%). Clause 29.3.4 puts the matter beyond doubt because it requires a proportionate shift penalty payment that is mathematically the same as applying the shift penalties on an hourly basis.
In this case the variations to the Award in 2020 and 2021 took the shift work allowances from comfortably within typical ranges to be, as Ai Group submitted, wildly out of step with comparable penalties for other employees. It is possible of course for particular conditions in particular awards to be non-standard or outside of typical ranges but if that was the intention of the variations in 2020 and 2021 then one would have expected cogent evidence to have been led to support the change and, in reality, one would have expected opposition from employer groups and careful examination and consideration by the Commission. None of these things occurred.
The parties agreed that the shift work provisions in the 2010 Award were based on and adopted substantively the pre-reform conditions in the Footwear Award. It seems that through a three-step process the shift worker provisions in the 2020 Award became disconnected from their origins. Viewed in isolation it was a logical step to include the original footnote about casual and part-time employees, particularly when there was no explicit provision in the Footwear Award. Viewed in isolation it was also a logical step to then include a corresponding footnote about permanent employees to match the provisions for casual employees. Similarly the final variation was a logical step so that the clause in the body of the award matched the summary of hourly rates schedule.
However in hindsight the second step was an error because the shift work provisions for full-time employees were not the same as the provisions for part-time or casual employees and so the footnote for casual and part-time employees should not have been duplicated for full-time employees. Unfortunately the third step repeated and solidified the second error.
If clause 29.3 does not contain an error then I am satisfied that there is ambiguity or uncertainty in relation to the meaning of the clause.
The provisions within clause 29.3 are capable of carrying more than one meaning. Ai Group’s construction and the CFMEU’s construction are both arguable from the words used.[44] Ai Group’s construction is not as strong as the CFMEU’s construction but it is nonetheless available on the ordinary meaning of the words used.
Clause 29.3 refers to weekly “rates” rather than amounts. Arguably the stated percentages are to be applied to “the weekly award rate per shift” (as Ai Group says it should) rather than applied to “the weekly award rate” (as the CFMEU says it should).
There is significant force in Ai Group’s argument that the terms of clause 29.3 contain uncertainty because of the industrial context in which the provisions appear.[45] The terms of clause 29.3 are broadly consistent with clauses 30.3(a) and 30.3(b) of the Award. The terms of clause 29.3, on the CFMEU’s construction, are anomalous with clauses 30.3(a) and 30.3(b), are at odds with the approach taken generally in modern awards and deliver rates significantly higher than the amounts generally payable in other awards.
Mathematically the additional penalty in clause 29.3 is the equivalent of 5.7 hours pay at ordinary time (being 15% x 38 hours) and the additional night penalty is the equivalent of 11.4 hours pay (being 30% x 38 hours). On the CFMEU’s construction the penalty has no connection at all to the time actually worked – employees would simply receive an additional 5.7 hours or 11.7 hours pay for each shift regardless of how many hours are worked.
The CFMEU criticised the lack of evidence led by Ai Group about how clause 29 is applied in the industry. Ai Group submitted, quite understandably, that there are significant and serious practical challenges for employers to provide evidence in these kinds of proceedings. The practical reality is that most employers would not be prepared to draw attention to their arrangements in case their interpretation of the Award is wrong. As Ai Group also submitted, the CFMEU chose to lead no evidence at all, not even from an organiser.
For these reasons I am satisfied that the Award should be varied to correct the errors and remove the ambiguity or uncertainty created by those errors. I am satisfied that it is necessary to vary the Award to achieve the Modern Award Objectives, in particular the need to promote flexible modern work practices and the efficient and productive performance of work.[46]
Applying the same logic as Deputy President Saunders applied in Application by Toll Transport Pty Ltd t/a Toll Transport [2022] FWC 3346[47], I am satisfied that there are exceptional circumstances within the meaning of s.165(2) of the Act. I am not satisfied that there will be any loss of accrued rights by employees as a result of the variation determination having retrospective operation. Whilst the CFMEU was critical of Ai Group not leading evidence of how clause 29.3 is applied in the industry, the CFMEU did not lead evidence of employees performing shiftwork and receiving shift allowances consistent with the CFMEU’s construction of the clause. Further, the retrospective operation of the variations will quell any disputation about shiftwork penalty entitlements that may have been payable for shiftwork performed after 2020 or 2021.
I am satisfied that it is appropriate to vary the award to correct the error retrospectively in order to overcome any consequences that have inadvertently flowed from the previous errors.
It is appropriate in the circumstances to vary clause 29.3 of the Award and clauses C.3.1 and C.5.1 of Schedule C to the award in terms consistent with Ai Group’s Draft Determination.[48]
Both the CFMEU and Ai Group wish to be heard on transitional provisions and therefore the matter will be programmed accordingly. Those transitional provisions might affect the final form of the Determination and so it is not therefore appropriate to make the Determination at this time.
DEPUTY PRESIDENT
[1] [MA000017].
[2] Ai Group submission, 7 February 2024.
[3] CFMEU submission in reply, 3 April 2024.
[4] Ai Group submission in reply, 26 April 2024.
[5] Clause 30 provides for shiftwork and penalty rates in the Textile industry.
[6] Variation on the Commission’s own motion – Modern award superannuation clause review [2023] FWCFB 264
[7] Application by Toll Transport Pty Ltd t/a Toll Transport [2022] FWC 3346
[8] Ai Group submission, 7 February 2024, para 73.
[9] Ai Group submission, 7 February 2024, para 79.
[10] Ai Group submission, 7 February 2024
[11] CFMEU submission in reply, 3 April 2024, para 20.
[12] Ai Group submission, 7 February 2024, para 83-85.
[13] Ai Group submission, 7 February 2024, para 91-93.
[14] CFMEU submission in reply, 3 April 2024, para 62.
[15] Variation on the Commission’s own motion – Modern award superannuation clause review [2023] FWCFB 264.
[16] Clause 35 was renumbered to clause 29.3 during the 4 yearly review.
[17] AP781127.
[18] Ai Group submission, 7 February 2024, para 83-85.
[19] CFMEU submission in reply, 3 April 2024, para 44.
[20] C.2.2 and C.4.1 in the exposure draft
[21] AM2021/59
[22] Ai Group submission, 7 February 2024, para 72.
[23] Transcript – 7 May 2024, PN395
[24] Ai Group submission, 7 February 2024, para 50.
[25] Ai Group submission, 7 February 2024, para 52.
[26] PR985127
[27] Clause 20.1
[28] Ai Group submission, 7 February 2024, para 57.
[29] CFMEU submission in reply, 3 April 2024, para 44.
[30] PR724998
[31] CFMEU submission in reply, 3 April 2024, para 46.
[32] Transcript – 7 May 2024, PN199.
[33] Transcript – 7 May 2024, PN392-393
[34] AM2021/59
[35] [2021] FWC 2677
[36] [2021] FWC 2677
[37] CFMEU submission in reply, 3 April 2024, para 90.
[38] Ai Group submission, 7 February 2024, para 104.
[39] 4 Yearly Review of Modern Awards [2017] FWCFB 6037.
[40] Application by Toll Transport Pty Ltd t/a Toll Transport [2022] FWC 3346.
[41] See [70]-[72] above.
[42] 4 yearly review of modern awards – Vehicle Manufacturing, Repair Services and Retail Award 2010 (Vehicle Award Decision) [2016] FWCFB 4418 at [73], Re Australian Industry Group[2021] FWCFB 115 at [20]–[21] and Variation on the Commission’s own motion – Modern award superannuation clause review [2023] FWCFB 264.
[43] See in particular clause 29.3.3.
[44] See[18] above.
[45] See [22] above.
[46] Section 134(1)(d).
[47] See [86] above.
[48] See [5] above.
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