Australian Communication Exchange Ltd v D-Com of Taxation
[2003] HCATrans 550
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Brisbane No B71 of 2002
B e t w e e n -
AUSTRALIAN COMMUNICATION EXCHANGE LIMITED
Appellant
and
DEPUTY COMMISSIONER OF TAXATION
Respondent
GLEESON CJ
McHUGH J
KIRBY J
HAYNE J
CALLINAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 6 FEBRUARY 2003, AT 10.20 AM
Copyright in the High Court of Australia
MR G.C. MARTIN, SC: If it please the Court, I appear with my learned friend, MR L.F. KELLY, for the appellant in the first matter and the cross‑respondent in the other matter. (instructed by Corrs Chambers Westgarth)
MS J.J. BATROUNEY, SC: If the Court pleases, I appear with my learned junior, MS M.M. BRENNAN, for the respondent in the appeal and the cross‑appellant in the cross‑appeal. (instructed by Australian Government Solicitor)
GLEESON CJ: Yes, Mr Martin.
MR MARTIN: If it please the Court, the matter before the Court, both on the appeal and the cross‑appeal, concerns the proper construction of the Clerical Employees Award - State. For that reason, our learned friends and us have agreed that I should deal with both the appeal and cross‑appeal first. Our learned friend will then respond and then I will reply.
There are three interpretations placed before the Court. The first of course is that of the judgment under appeal, the Full Court of the Federal Court. The matter that is of debate concerns whether or not casual employees actually work overtime and whether or not as a result of that their employer should be required to pay a superannuation contribution for the hours worked as overtime.
HAYNE J: Is that the issue, or is the issue whether the employer has complied with the relevant industrial instrument?
MR MARTIN: That is an issue, your Honour, but to answer that, one needs to determine what is the obligation upon the employer.
HAYNE J: Just so.
MR MARTIN: The obligation depends upon whether or not, when the employees work at certain times, they are working ordinary hours within the meaning of the award or whether they are working overtime within the meaning of the award.
GLEESON CJ: Is this an issue that affects the financial interests of the employees or the revenue obligations of your client, or both?
MR MARTIN: It affects the financial interests of the employees if the construction for which we contend is upheld in that they would not then receive a contribution for the hours that we say are overtime hours.
GLEESON CJ: And therefore would receive less superannuation in the long run?
MR MARTIN: Yes. If our learned friends are correct, then we are liable to pay and have paid the charge that arises under the Superannuation Guarantee (Administration) Act. I will take your Honours to both the Act and the award shortly.
KIRBY J: So the employees who have an interest, are they aware of the proceedings if they would have wished to be heard in the matter?
MR MARTIN: Certainly they are not formally aware. I cannot say what their state of knowledge is of the matter.
KIRBY J: They are just outside the Court and will be affected by what we decide and have no say in how we decide it.
MR MARTIN: Well, your Honour, the ‑ ‑ ‑
KIRBY J: It sounds like the 19th century.
MR MARTIN: May I put it this way: the argument being advanced on behalf of the Deputy Commissioner is the highest that the employees could achieve. The argument advanced for the Deputy Commissioner would afford employees the greatest superannuation contribution available.
KIRBY J: So, in effect, the argument of the Deputy Commissioner is protecting the position ‑ ‑ ‑
MR MARTIN: Indeed.
KIRBY J: Yes, very well.
MR MARTIN: The Federal Court decided that the interpretation given to the award by Justice Dowsett was incorrect and that overtime, or the hours that are worked that the employer has called overtime, were subject to superannuation contributions but only for that amount which is the increase over the rate that would be paid for an ordinary hour’s work. So that if an employee is paid $10 an hour for an ordinary hour of work, in the first session of overtime the employee would receive $15, being time and a half, the Federal Court’s decision means that superannuation applies, or the charge, only applies to that $5 differential.
GLEESON CJ: In relation to an hour worked by an employee between 10 pm and 11 pm on a Saturday night – I only choose that because it sounds like an example of what is outside ordinary working hours – on your approach, no part of the remuneration for that hour attracts the obligation and on your opponent’s approach, or one of your opponent’s approaches, you divide up the remuneration paid in respect of that hour between an amount that would have been paid for working an hour between 10 am and 11 am on the Saturday morning and what is actually received for working between 10 pm and 11 pm on the Saturday evening, is that the way it works?
MR MARTIN: Well that is how the Federal Court decided it, but we understand our learned friends to say that for the hour worked late on a Saturday night, the entire amount, the entire payment ‑ ‑ ‑
GLEESON CJ: That is the third possibility.
MR MARTIN: That is the third possibility which is advanced in the cross–appeal.
GLEESON CJ: So your argument is that for someone who works between 10 o’clock and 11 o’clock on a Saturday night, there is no contribution ‑ and that is Justice Dowsett’s conclusion - the Full Court says for somebody who works during that hour you divide the remuneration up in the manner that I mentioned earlier.
MR MARTIN: Yes.
GLEESON CJ: An argument put against you in this Court is that you paid a contribution in relation to the whole of the payment.
MR MARTIN: That is so. Now, that, your Honour, of course, only applies to casuals. There is no debate that if a full‑time employee works from 10 pm to 11 pm on a Saturday night and receives an overtime payment that there is any superannuation payable. There is none.
HAYNE J: This perhaps illustrates the fact that we are beginning the problem somewhere in its middle. We are not beginning the problem, it seems to me, where we must begin it, namely in the Administration Act, and with the question which appears on its face to be presented by that Act, which is whether there has been compliance with the industrial instrument.
MR MARTIN: Yes.
HAYNE J: We are not concerned with questions of broad economic consequence save so far as those might in some way bear upon the question of what the industrial instrument means.
MR MARTIN: Your Honour, we would submit that the gist of the problem is what the award requires the employer to do. Before we go to that, might we go first to the Act which is ‑ there are two Acts. There is a Charge Act, a very brief Act which imposes the charge, and then there is the Superannuation Guarantee (Administration) Act.
GLEESON CJ: Where do we most conveniently find this, Mr Martin?
MR MARTIN: It will be in one of the ‑ ‑ ‑
GLEESON CJ: Yes. Is Reprint No 2 of the Superannuation Guarantee (Administration) Act 1992 the relevant one?
MR MARTIN: Yes, that is the relevant Act.
GLEESON CJ: Thank you.
MR MARTIN: Without taking your Honours to the Charge Act, which is only a few pages long, it provides that the Administration Act ‑ if I can call it that ‑ is incorporated into the Charge Act. It also provides that there is a charge to be imposed on an employer for what is called a superannuation guarantee shortfall. Then one goes to the Administration Act to find out how that is to be calculated. When the Act was introduced there were transitional provisions which do not concern us today because the period in question is the three financial years commencing 1995-96 and transitional provisions were for earlier in the 1990s.
The Administration Act has a definition section and in section 6 at page 4 of the print it defines “industrial award” to mean, amongst other things:
an industrial award or determination made under a law of the Commonwealth, a State –
On the following there is a definition of “ordinary time earnings” which becomes relevant when an employer does not comply with an award obligation. Your Honours will see that it means a number of things but it includes:
the total of:
(i) earnings in respect of ordinary hours of work –
Ordinary hours of work is not defined. Then, if we jump to section 19, which is on page 25, this tells us what the “superannuation guarantee shortfall” is for the years in question. You will see in subsection (2) a formula set out where on one side you place the:
Total salary or wages paid by the employer to the employee for the quarter –
and you multiply it by the:
Charge percentage for the employer for the quarter –
over:
100 –
and I will take your Honours to what the charge percentage is, shortly.
So that if in a quarter an employee earns $1,000 and the charge percentage is five, then the guarantee shortfall is $50 for that employee for that quarter. Now, it is important, and could I ask your Honours to note, that this section says that the shortfall or the charge applies to the total salary or wages paid. It does not talk about ordinary time earnings. So that that would include, we would submit, total salary and wages, all payments received, whether it be ordinary time, overtime, all allowances and the like.
If I could take your Honours now to section 21 on page 28, there is a table which shows the percentages which were to be applied over time, and you will see for the 1995-96 year it was five and for the succeeding two years six, and at the moment it stands at nine, but it is five, six and six which are the relevant figures.
HAYNE J: Why is section 21 engaged? Was this person a person who was not an employer for the whole of the 1991-92 year?
MR MARTIN: Yes, your Honour. Then the Act having set up the charge and, in effect, assuming that there is a shortfall, then provides ways in which an employer can reduce or eliminate the shortfall. One way is provided in section 22 where a contribution is made to a defined benefit superannuation scheme. That is not a matter to which we need advert.
The second and relevant way is in section 23, which allows a reduction of the charge percentage if a contribution is made to another fund. At the foot of page 30, your Honours will see in section 23(2) that there are set out three conditions. If in the relevant period an employer is required by an award to contribute for the benefit of an employee to a fund and, in (2)(b), that contribution is a specified percentage of the employee’s notional earnings and the employer does in fact contribute to a fund in accordance with the award, then the charge percentage is reduced according to the formula worked out on page 31.
Now, this process has been explained or set out in a diagrammatic form in the explanatory memorandum and it may be of some assistance if I take your Honours to that, and it is best seen in the respondent’s supporting material which is a document which has small plastic tabs on the side. If you go to tab 9 and then to page 30, this is designed to show ‑ ‑ ‑
HAYNE J: The wiring of the XJ Holden, I would have thought, Mr Martin.
MR MARTIN: Yes, there is some similarity. It is intended ‑ perhaps rather than showing, it is intended to show an employer how to determine what the earnings base is and the earnings base is the base upon which the calculation or the percentage is made. So the first question is:
Was the employer contributing to the complying superannuation fund immediately before 21 August 1991?
The answer in this case is no. So you go down to:
Is the employer required to make superannuation contributions under an award, arrangement or scheme?
The answer is yes.
Does the award, arrangement or scheme have an earnings base?
The answer is yes.
Is the earnings base less than ordinary time earnings?
We say yes.
Are the contributions made in accordance with an award?
We say yes.
Earnings base is as per the award.
Now, the alternatives which are available for an employer in our client’s position, that is, someone not contributing before August 1991 are either the “Earnings base is as per the award” or you will see it at the foot of that diagram on the right the “Earnings base is the ordinary time earnings” and that refers back to the definition in the Act. It is the respondent’s contention that the earnings base for the casual employees is the ordinary time earnings.
Effectively, the Act says that if an employer is subject to an award and the award says that the employer must contribute a percentage of an earnings formula, and the employer does that, and the percentage contributed is the same as the percentage for the relevant year under the Act, then there is no shortfall; the employer has complied with the Act. So that, for example, in 1995-96, our client says we contributed 5 per cent of the relevant earnings under the award; therefore we are not liable for any shortfall.
KIRBY J: What is the policy behind this legislation?
MR MARTIN: That appears from some of the explanatory material, but it was introduced in order to provide an incentive for employers to pay a minimum amount for their employees into superannuation funds of one type or another. It was made clear by the Treasurer when it was introduced that the purpose of the Act was to encourage employers to comply with award obligations. It was also made clear that compliance with an award obligation may very well mean that a lower amount is paid than might otherwise be paid under the Act, because the Act has a definition of ordinary time earnings and there might be a tighter, smaller definition under an award. If that is the case, so be it.
KIRBY J: Was this at a time in industrial relations when there was a shift to getting more in terms of superannuation in awards than just wages?
MR MARTIN: Your Honour would recall a number of cases involving questions about whether you could have an industrial dispute about superannuation payments. Those cases were in the mid‑1980s. This followed that and, according to the explanatory memorandum in the second reading speech, it was more designed to have employees be able to access a fund when they retire – in other words, to shift the burden from the old age pension to something else.
KIRBY J: Self‑funded.
MR MARTIN: Well, self‑funded in that the amount ‑ ‑ ‑
KIRBY J: Well, self and employer-funded.
MR MARTIN: Yes. Well, the amount that was paid by the employer is actually regarded in most awards as part of their overall remuneration but, putting taxation issues to one side, that was the purpose.
KIRBY J: I see.
HAYNE J: In section 23(2)(b), we find this expression:
the requisite contribution is a specified percentage of the employee’s notional earnings base –
Do we need to understand what the expression “employee’s notional earnings base” means?
MR MARTIN: Yes. The notional earnings base is that amount which is the base provided for under the award – and I will get that for you in a minute, your Honour. Section 14(2) on page 20, once again dealing with the situation where contributions were not made before August 1991:
the expression “notional earnings base” means the earnings of the employee that, under the award . . . constitute the employee’s earnings by reference to which the requisite employer contribution is to be calculated.
So that you go to the award, look for the superannuation clause and see what it tells you to do. There is a distinction drawn in this Act. If the award, for instance, was to say that superannuation was to be 5 per cent of $20,000, fixed at that sum, then this Act says that is not sufficient; that does not comply. It must be an earnings base that properly represents the earnings and is not simply a fixed sum, but we will come to that shortly.
Now, as I have said, the Act directs us to the award. If I could take the Court to that. The award is found in annexure C to the appellant’s submissions.
HAYNE J: Forgive me, Mr Martin. I am still back in section 14. Perhaps I am delaying you unnecessarily but 14(3) seems to have some work which might bear on it, which seems to take notional earnings base out of the award off into employees’ ordinary time earnings.
MR MARTIN: Your Honour, 14(3) only deals with the situation where there is a contribution:
in accordance with an occupational superannuation arrangement ‑
which has a defined meaning and does not include an award contribution, or:
a law of a kind referred to in (1)(ab) ‑
or another scheme.
HAYNE J: I see. So you say 14(3) does not require consideration.
MR MARTIN: It does not.
HAYNE J: Yes, thank you.
MR MARTIN: In the award ‑ this is a “common rule” award and a “minimum rates” award. It, of its nature, applies widely across industries and for that reason, amongst others, you will find that it does not descend to particularity when referring to the types of employment that might be offered. Nevertheless, it does cover our client. If I could start in the document, which we have provided, at page 7, clause 2.1, a standard clause requiring the employer to specify the type of engagement, whether it is weekly, part‑time or casual.
Then if I could take you to clause 3.5 on page 20. This is the superannuation clause and it is in the standard form used in Queensland State awards. Under the legislation the Commission is empowered to issue general rulings and from time to time it issues general rulings relating to the forms of particular clauses, and this is a clause which is in accordance with that general ruling. So it is in this award amongst others.
You will see at 3.5(2) the requirement that an:
employer shall contribute on behalf of each eligible employee . . . an amount calculated at 3% of the employee’s ordinary time earnings, into an Approved Fund –
That figure of 3 per cent has not been varied since the award was introduced in 1993, but, of course, as a minimum rates award an employer is entitled to pay more than that and a sensible employer, in order to avoid a shortfall under the Act, does pay more than that. So, over time, while the rest of the award has been varied, that has stayed the same, because the Commission had particular reference to the legislation.
The important part of clause 3.5 is on the next page and it is the definition of “Ordinary time earnings” and this is the definition to which section 14(2) of the Administration Act attaches and it talks about the notional earnings base. For the purposes of the Administration Act, this is the notional earnings base. Your Honours will see that it says that “Ordinary time earnings” shall mean:
the actual ordinary rate of pay the employer receives for ordinary hours of work –
including certain things.
The term includes . . . casual rates received for ordinary hours of work.
KIRBY J: Is there any clue to the nature of ordinary earnings by the certain things that are ‑ ‑ ‑
MR MARTIN: Yes, I will be coming to that very shortly, your Honour, but it does provide that:
Ordinary time earnings shall not include overtime –
So that earlier, in answer to your Honour the Chief Justice’s question, that was why I said a full time employee, who works 10 pm to 11 pm on a Saturday night, receives an overtime payment, but it is not part of that employee’s ordinary time earnings. The ordinary time earnings do not include overtime.
McHUGH J: How do you determine whether it is overtime for the casual employee?
MR MARTIN: That is the whole issue in the case and it is a question of ‑ I will have to take your Honour through the various clauses in the award. There is no clause that simply says, very clearly, beyond these hours a casual is on overtime. Nothing quite so precise.
McHUGH J: So you do not know whether 10 pm to 11 pm on a Saturday night is ordinary time or overtime, it is just by the bare statement of it?
MR MARTIN: No, we would submit that it certainly is overtime for any employee, because I will take you to the “ordinary hours of work” clause shortly, and it talks about a spread of hours and so on, and at that time on a Saturday night is outside the spread and would be overtime for anybody.
McHUGH J: What about rostered employees on shift work?
MR MARTIN: This award does not prescribe any conditions for shifts. It allows shifts to be introduced by agreement between the employer and the relevant union. Generally speaking though, when shifts are introduced, the shifts are worked as ordinary hours even if they are from 10 pm to 6 am and there is a compensation by shift allowance, but that does not occur here. As you might expect in a clerical award it is rare to have shift work, but if there is to be shift work it is going to be by agreement and that agreement would encompass all those matters.
McHUGH J: I would not have thought it would be rarer than an occupation such as is followed by people in this case who are on call; you have to be employed 24 hours a day. But, anyway ‑ ‑ ‑
MR MARTIN: Your Honour, there is another provision in the award that says that if they are employed ancillary to the main business of an employer, then they are working the ordinary hours of the main business. So that in a metal shop, if you have a metals award applying and you have two people in the front office, then the ordinary hours that the metal workers apply will be worked by them, in particular start and finish times.
GLEESON CJ: What about people who work for stockbrokers or merchant bankers whose job requires them to be in communication with people in the United States of America?
MR MARTIN: In that case, your Honour, unless there was an agreement as to shifts, then the ordinary provisions relating to overtime would apply. So that if someone started work at 7 pm for eight hours, then the first three hours would be at time and a half and the final five would be at double time. I will return to this definition of “ordinary time earnings” later. It is, as you would expect, quite important.
I will turn immediately now to the question of hours of work and overtime and how they are defined, and that is at clause 4.1 on page 25. Clause 4.1(1)(a) is a clause designed to allow for some flexibility of hours because it allows work to be done over a 28-day cycle and you might have different hours in each week of that four-week cycle.
CALLINAN J: The employer seemed to allow the employees to choose their own hours, is that right? Is there evidence of that, or am I wrong about that?
MR MARTIN: In our case, your Honour, there was evidence that employees were allowed to swap periods of work so that if they were allotted a four hour period on Monday afternoon which did not suit, they could swap with another employee. That was allowed but ‑ ‑ ‑
CALLINAN J: So the actual hours or times which they worked, there was a lot of flexibility about that then?
MR MARTIN: Well, the evidence was to the effect that there were people working over a 24-hour period, yes, and there was a concentration of employment at particular times during the day because of the type of work they are doing. They are relaying calls from hearing-impaired people to others and for that reason one might expect that there would not be much work to do in the early hours of the morning, but during the day and perhaps early evening there are more people who are working. But there is no evidence that employees were allowed to actually choose when they worked.
So the first part of this talks about a “cycle” of hours which they are entitled to work and requires that:
ordinary hours of work shall be an average of 38 per week –
Then in (b) the award provides for when those ordinary hours may be worked and they may only be worked on Monday to Saturday, so any time worked on a Sunday is not an ordinary hour, and on Monday to Friday the ordinary hours are those between 6.30 am and 6.30 pm – this is in (1)(b)(i) – and 6.30 am and 12.30 pm on a Saturday. So that the 38-hour average ordinary hours a week must fall within that spread of hours.
Then there is an impost for people working on a Saturday morning, even though it is ordinary hours, in (1)(a)(b)(ii), where employees working then are to be paid for at a rate of time and a quarter except casuals.
If I can now take you to (1)(f) on the same page:
ordinary hours. . . shall not exceed 10 hours on any day.
The true import of that is, though, that you need to read further. If ordinary hours “are to exceed 8” then there must be agreement between the employer and the employees concerned. So that, in effect, without agreement, 8 hours is the length of time for which ordinary hours may be worked on any day, and you cannot work more than 10 ordinary hours even with agreement on any day.
Can I just ask your Honours to note now that it is said against us that this clause, 4.1, does not apply to casuals. We would ask your Honours to note that in particular 4.1(1)(b) does not appear to have any discrimination as to part time, full time or casual, and we would argue that the fact that it excludes casuals from one part of it indicates that the rest of it is intended to include casuals.
GLEESON CJ: If these clause does not apply to casuals, what is it that would enable you to relate the concept of “ordinary working time” to casuals?
MR MARTIN: If 4.1 does not apply to casuals then the only way it would ordinarily be done was to use the – if I can call it – common law view of ordinary hours which has been looked at in a number of cases concerning workers compensation and there is nothing in the award. If this is taken away and does not apply to us then we cannot point to anything in the award that defines “ordinary hours” for casuals. When I take you to the casual provision, we say it relates back to this. There is another reference in 4.1 – and this is at page 27 – to casuals, 4.1(4). It says:
Ordinary hours for all employees . . . shall be paid on the basis of not more than 38 per week –
(excluding part time employees and casuals) –
We say that by excluding casuals from that clause it is intended that casuals be covered by the balance of 4.1. We then come to “Overtime” which is on the same page, 4.2. To understand what overtime is, one works with 4.1 because it says:
Except –
as otherwise provided –
all work done outside or in excess of the ordinary working hours on any day shall be paid for at the rate of time and a‑half for the first 3 hours and at the rate of double time for –
the balance. We submit that the words “outside . . . ordinary working hours” refer to the spread of hours, that is, work done on weekdays before 6.30 am or after 6.30 pm and that work done in excess of the ordinary hours would be, on a weekday, work done after eight ordinary hours, even if it is within the spread.
GLEESON CJ: Does that mean that a casual who works from 10 pm to 11 pm on a Saturday night is paid at the rate of time and a half for the first three hours?
MR MARTIN: Yes, your Honour.
GLEESON CJ: So it is common ground that this clause governs the remuneration entitlements of casuals?
MR MARTIN: It is not common ground, no. I could not say that. The Federal Court in effect decided that although they are paid at overtime rates they are not working overtime, and they drew a distinction there. As we understand our learned friends, they also draw that distinction.
GLEESON CJ: But if this does not cover casuals, what is it that tells you how much casuals are entitled to be paid?
MR MARTIN: Your Honour, there is later on in the casual clause a reference back to this clause but if it did not apply, there would be nothing that would tell you what to pay them. The second sentence in 4.2(1) was the sentence upon which the Federal Court attached their reasoning:
Such payments shall be in addition to the actual or ordinary weekly wage paid to each employee.
The Federal Court said that casuals do not have an actual or ordinary weekly wage, therefore they are not really working overtime.
KIRBY J: They have an actual wage.
MR MARTIN: We submit they do, yes.
KIRBY J: What does “actual” govern?
MR MARTIN: Although one strives to assign a meaning to as much as you can of the language of an award, sometimes there are belt-and-braces jobs and this may well be one of them. It may be that “actual” is supposed to direct a person to the fact that there may be an over-award payment and so that is the actual payment that is made. “Ordinary weekly wage” may be a reference to the wage that is received by a person who works as a full‑time employee because the award requires that even if over a four‑week period they might not in one week work 38 hours they are still paid for 38 hours.
CALLINAN J: Well, you have the “actual ordinary rate of pay” – that is the phrase used in 3.5(3)(d) of the award:
“Ordinary time earnings” shall mean the actual ordinary rate of pay ‑
MR MARTIN: Yes.
CALLINAN J: That is “actual ordinary”, not “actual or ordinary”.
MR MARTIN: That is right. We cannot find a solution to the variations in expression in the award where they sometimes occur. It may be that that is our fault, but it may also be that they have simply – as has been recognised in many cases – been expressed in language that is designed to capture concepts.
KIRBY J: Awards are not typically drawn by Parliamentary Counsel’s Office.
MR MARTIN: Quite, your Honour, yes.
KIRBY J: Often they are hammered out in bargaining over a table by very angry people dealing with each other.
MR MARTIN: Indeed. In fact, we have some things to say about the nature of an award later, and how they can originate.
KIRBY J: At least, it used to be so. Awards are now in decline in significance in industrial relations.
MR MARTIN: That is so federally, your Honour, but in the State – in Queensland, at any rate – awards are still a substantial means of regulation. Now, it is said against us that overtime is not worked by casuals and that all the hours they work are ordinary hours. Amongst other things, we point to ‑ ‑ ‑
GLEESON CJ: How much do they get paid?
MR MARTIN: They are paid – our learned friend’s argument is that they are paid at an ordinary rate for hours that fall within the spread of ordinary hours, and they are paid an overtime rate for hours they work outside that spread but they are not working overtime.
McHUGH J: Well, 4.7(3) gives much support to that argument, does it not?
MR MARTIN: Does or does not, I am sorry?
McHUGH J: Does. It gives support to it. Clause 4.7, read as a whole, rather suggests that casual employees do not work overtime but if they work “outside the spread of ordinary working hours” they get “paid at overtime rates”.
MR MARTIN: It does say that, your Honour, and the overtime clause itself says that:
work done outside or in excess of the ordinary working hours on any day shall be paid for at the rate of time and a-half ‑
It would be, in our submission, the correct interpretation to say that that tells you that it is overtime. If you are paid for it, just as 4.2(1) says that a full‑time employee who works certain hours is paid for at a rate, 4.7(3) repeats that in a much abbreviated form:
All time worked outside the spread of ordinary working hours or in excess of 8 in any one day or 38 in any one week shall be paid for at overtime rates –
GLEESON CJ: What is the actual expression about which there is a dispute of construction?
MR MARTIN: Whether or not 4.1 hours of work applies to casuals. My learned friends say that all hours worked by casuals are ordinary hours because for other reasons they are employed by the hour.
GLEESON CJ: Now, does this involve an assumption that there is some kind of dichotomy between ordinary hours of work and overtime that involve the assumption that if something is not overtime it must be an ordinary hour of work or, looked at from the other point of view, if it is not an ordinary hour of work it must be overtime?
MR MARTIN: I think it is the latter, your Honour, because two employees doing the same job side by side can, working at the same time, receive different rates of pay if one started earlier than the other. So that although they are working at the same time and they are working at 3 pm in the afternoon, say, if employee A started earlier and has exceeded the eight hours in a day, that employee is receiving overtime, but employee B who started a couple of hours after A is not receiving overtime for the same work at the same time.
May we suggest that part of the problem with the respondent’s arguments, and indeed part of the problem with the Full Court of the Federal Court’s reasoning, is the importation of the notion that overtime is some additional work that is being done. If we go back to the time when people generally worked 9 to 5 five days a week, overtime was when you kept working after 5 pm. You had done your daily darg. Overtime under this award is not necessarily related to that. Overtime under this award is a different concept. It is a concept which is partly designed to dissuade employers from instructing employees to work at certain times because they have to pay them more.
HAYNE J: Let it be assumed that there is the debate about the construction of 4.1 that you have just mentioned. What is the connection between that debate and the operation of 3.5(2)(a)?
MR MARTIN: It is not direct because it is actually about the definition of “ordinary time earnings” within 3.5(2)(a).
HAYNE J: What then is the debate between the parties, as you understand it, about the construction of the expression “ordinary time earnings” when found in 3.5(2)(a)?
MR MARTIN: The debate is that in the definition of “ordinary time earnings” it says:
The term includes . . . casual rates received for ordinary hours of work.
Our opponents say that all hours worked by casuals are ordinary hours. We submit that casuals can and do work overtime hours and that it is excluded by the next sentence, that is:
Ordinary time earnings shall not include overtime ‑
What we are talking about of course is earnings, what a person is paid. That is the way in which overtime is expressed. It is expressed as a payment. You are paid overtime in certain circumstances. If you are paid that, we say that you are on overtime and your earnings for that overtime are expressly excluded. So the earnings for ordinary hours are in. If you are paid at an overtime rate, they are out.
McHUGH J: Clause 4.7(3) seems to indicate strongly to my mind that casual employees do have ordinary working hours and they may also work hours that are outside ordinary working hours, because that is what it says in terms:
All time worked outside the spread of ordinary working hours . . . shall be paid for at overtime rates ‑ ‑ ‑
MR MARTIN: That is a summary, your Honour, or an abbreviated version, I should say, of what applies to full‑time employees. The same conditions apply for the payment of overtime to full time and casuals.
McHUGH J: I must say when I first read this, rather quickly, I thought that 4.1 applied to casual employment, as did 4.7, but 4.2, as such, probably did not, but it was effectively picked up in 4.7(3) and 4.1(f).
MR MARTIN: It is, we would submit, picked up in that way, but it is also ‑ within 4.2 there were internal indications that it is meant to apply to casuals. If I might take you to 4.2(3):
No employee shall work overtime unless instructed to do so by their employer –
There is no distinction drawn between the three types of employee. Clause 4.2(4) is talking about when one can take tea, supper and so on; there is no distinction drawn there so far as the three grades of employee are concerned and perhaps, more importantly, from a safety point of view, 4.2(7) deals with that situation where employees working so much overtime results in them finishing less than 10 hours before they are due to start their next working term, there are provisions that deal with that. There is no indication that that does not apply to casuals and it would be difficult to conceive why this particular protection would not apply to casuals. It is a protection in the sense that there is a substantial penalty for an employer who does not allow 10 consecutive hours off duty between the end of one work period and the beginning of another.
So, we would respectfully submit that those are the indications that 4.2 is intended to apply to casuals, together with the reference back to 4.2, which exists in 4.7.
McHUGH J: Assume for the moment that that is not so; assume against you that 4.2 is not engaged in any way in respect of a casual, focus attention only on 3.5(3)(d) and the definition of “ordinary time earnings”. On the assumption identified, how, if at all, is that definition to be given effect?
MR MARTIN: One would look at 4.7(3) which tells the reader that one must decide what is the spread of ordinary working hours for a casual, and that requires you to go to 4.1. One can tell that whether or not work is done in excess of 8 in a day or 38 in a week, but certainly the spread of ordinary working hours requires reference back to 4.1. One needs necessarily, notwithstanding your Honour’s assumption, to go to 4.2 to find out what overtime rates are, because it is the only clause which tells you that overtime rates at time and a half for the first three hours and double time thereafter. So that ‑ ‑ ‑
HAYNE J: It is at that point ‑ I know I am being fearfully slow and dense about it, Mr Martin. I just do not understand that. I do not see why we have this embroidery on the problem for the moment. It seemed to me that paragraph (d) required identification of the meaning of “for ordinary hours of work”, it required identification of something called “the actual ordinary rate of pay”, and true it is you have to find illumination for that, if you can, out of the rest of the award provisions for what overtime is, et cetera, but assume against you that casuals are not in any way affected by the overtime provisions in any relevant way, you have still to give meaning to “actual ordinary rate of pay for ordinary hours of work” in light of the fact that casual rates received for ordinary hours of work is defined to fall within ordinary time earnings, and that simply invites attention to spread and number. So if it is more than 38, if it is outside the spread, it is not within actual ordinary rate of pay, period.
MR MARTIN: Yes, we would agree with that, your Honour. That is, with respect, the basis of our argument, that casuals are covered by the provisions of the award which deal with ordinary hours, or the definition of “ordinary hours”, and the payment or the casual rates received for ordinary hours of work have to be determined by reference to 4.1.
HAYNE J: But “ordinary hours” are not referring to the particular casual employees ordinary hours, if they could ever be identified, but to something identified in the award as “ordinary hours”, namely, hours worked within a spread and up to a maximum number.
MR MARTIN: Yes, your Honour, just as in the first sentence it says that the earnings mean “the actual ordinary rate of pay” received “for ordinary hours of work”, so that it may be that the second sentence is in there to avoid doubt. It may be that the second sentence is there to ensure that casuals who receive a loading are nonetheless covered for their ordinary hours of work, because it says, “actual ordinary rate of pay”, and one could conceive of an argument that someone would say, “actual ordinary rate of pay is no more than the rate of pay set down in the award for full‑time employees.”
HAYNE J: Without the 22 per cent loading for casuals?
MR MARTIN: Yes. The next sentence is there to ensure that casuals do receive – or ordinary time earnings do include casual rates.
As I was saying, if 4.2, if your Honour’s assumption was to eventually be the one found to be correct, then there would still be the capacity by reading 4.1 with 4.7 to arrive at the conclusion for which we contend.
CALLINAN J: Mr Martin, leaving aside express provisions of the award, it seems likely that any hours worked by casual employees short of 38 hours in a week and short of eight hours or not more than eight hours on any one day are ordinary hours of work for casual employees. Because they are casual, they can be called upon or can in fact work at any time, so what might be extraordinary hours for other people are ordinary hours for casual employees and what they are paid are ordinary rates of pay.
MR MARTIN: Your Honour had two criteria. There is a third one of the spread of hours too.
CALLINAN J: Add that in too, yes.
MR MARTIN: In that case, when those three criteria are met, then we say yes, they are ordinary hours. But if one of those criteria is not met, then it is overtime, even though it might be at 3 pm in the afternoon on a Wednesday, for example, just as it could be overtime for any other of the categories of employee.
CALLINAN J: So that is what the argument really comes down to. If the three criteria are present they are ordinary hours. If any one of them is absent they are not ordinary hours, they are overtime, is that right?
MR MARTIN: Yes, that is so.
CALLINAN J: That is really the argument.
MR MARTIN: Yes, that is how we put the definition of “ordinary hours” so far as casuals.
CALLINAN J: Spread of hours, total of 38 hours a week and not more than eight hours in any one day?
MR MARTIN: Yes.
GLEESON CJ: A casual employee engaged by your client might have another job. That employee might work 9 to 5, Monday to Friday in a butcher shop, but that employee works every Saturday evening for your client from 7 pm until some time on Sunday morning. If you look at the hour that that person works for your client, between 10 pm and 11 pm on Saturday, although it is ordinary in the sense that every Saturday night at that time that person will be found working for your client, it is outside the spread of ordinary working hours and you say not within the concept of “ordinary working time”.
MR MARTIN: We do, your Honour. The concept of “ordinary working time” is a concept often found in workers compensation legislation. What were the ordinary hours worked by this injured employee prior to the injury and upon what sort of hours should his compensation be based. There are cases in this Court that have been referred to by our learned friends, Catlow, Kezich and Scott v Sun Alliance, all of which deal with workers compensation legislation and what might be ordinary hours under that legislation. But that concept is not a concept which works with this award. Of course, for the employee he or she might say, “I ordinarily work every Saturday night. I work every Saturday night.” It is not an ordinary hour within the meaning of the award so far as that employee’s rate of pay is concerned. That employee receives overtime for that work. In your Honour’s example, working six hours on a Saturday night, all of which we submit is overtime because it is outside the spread, attracts no superannuation payment and that was something that the Federal Court looked at.
GLEESON CJ: Now, your solution to that problem is to say that it attracts no overtime payment. Your opponent’s preferred solution is to say they are all ordinary working hours and do attract. What was the Full Court’s solution?
MR MARTIN: Assume there is six hours worked: the superannuation contributed attaches to the ordinary rate component of each hour, so if you assume there is a $10 per hour payment, overtime is $15 and then $20 an hour as you go on. The contribution only attaches to the difference between the ordinary rate and the overtime rate. I beg your pardon, the contribution only attaches to the ordinary rate and not what they call the enhancement or the increment.
HAYNE J: Can I just understand, then, some other aspects of the scheme at a much larger level. The Commissioner issues an assessment against you in respect of the guarantee amount, you pay that assessment and that amount goes into consolidated revenue, does it not?
MR MARTIN: Yes, it does.
HAYNE J: But does it, any way, directly or indirectly, end up for the benefit of the employee?
MR MARTIN: Yes, your Honour.
HAYNE J: How?
MR MARTIN: There is a provision in the balance of the Administration Act which directs the Commissioner in the manner in which that money is to be administered so that I cannot tell your Honour whether it goes into the superannuation fund that other moneys might be paid into or not but it does get to the employee.
HAYNE J: Does it stand in answer to a claim by the individual employee that you, my employer, are in breach of the award because you have not paid the superannuation obligation that you had under the award?
MR MARTIN: Without wishing to make an admission of breaching the award the Full Bench of the State Commission considered that situation and expressed the view that it would be a breach of the award. One can see why because the amount was not paid into the fund agreed even though the employee receives it in another way. So, a wages claim would probably deal with that.
McHUGH J: But the way this scheme works is rather like the maintenance payment scheme, is it not, that the government collects the shortfall and then it goes to a complying fund, or whatever it is, for the benefit of the employee?
MR MARTIN: That is as we understand it. Yes, it stands to the benefit of the employees. The actual charge that is made against the employer is calculated on a different basis. The definition under the Act provides, as you might recall “total salary and wages”. So that, putting to one side casuals, if you do not pay your full‑time employees the right amount for the ordinary hours then you will be subject to a charge upon their total salary which could include their overtime. So that the incentive is there to get it right at the beginning otherwise the employer could be subject to an even greater charge which is not tax deductible and which is increased by interest and an administration charge.
McHUGH J: Earlier in your submissions you said that salary or wages included allowances but I must say I doubt that unless it is defined to ‑ ‑ ‑
MR MARTIN: Ordinary time earnings under the award includes ‑ ‑ ‑
McHUGH J: No, I was talking about in terms of the formula in section 19(2) I think.
MR MARTIN: Yes.
McHUGH J: When you were referring to 19(2) you said that salary or wages would include allowances but – section 11.
MR MARTIN: Section 11 deals with the definition of salary and wages as an inclusive definition.
McHUGH J: Yes.
MR MARTIN: I understand that there was a reference in the explanatory memorandum in accordance with what I said earlier but it, strictly speaking, is not relevant to the argument we put forward.
Can I quickly take your Honours by way of comparison to 4.6, which is part‑time employment, and it is a clause to which the Federal Court had reference. This is on page 29. A part‑time employee is a person who is:
employed for not less than 15.2 hours per week and for not more than 32 ordinary hours per week.
“Ordinary daily hours” are:
worked within the spread of hours prescribed in Clause 4.1(1)(b) –
There is a requirement that they be not less than four. In other words, you cannot call a part‑time employee in for less than four. Then, in 4.6(2):
All time worked outside of the spread of ordinary working hours as provided for in clause 4.1(1) or in excess of the daily or weekly hours as prescribed herein, shall be paid for at overtime rates.
Now, different words are used, but the meaning is the same as 4.7(3), dealing with casuals.
CALLINAN J: Probably everybody knows this, but what is the difference ‑ I do not – between a casual and a part‑time employee?
MR MARTIN: A casual employee can be dismissed without notice; a casual employee has no entitlement to annual leave, sick leave; there is no certainty of employment; when you ‑ ‑ ‑
CALLINAN J: That comes out of 2.2, does it?
MR MARTIN: Yes, and 4.7(1), which is at the foot of page 29, and the balance of the award, which makes it clear that leave and so on do not apply.
McHUGH J: They are compensated for by the 22 per cent loading.
MR MARTIN: Indeed, and the loading is specifically for that ‑ uncertainty of employment, no annual leave, no sick leave, and so on. Part‑timers are paid an hourly rate, as are casuals, and the Federal Court, wrongly, we submit, took the view that there was a fixed weekly payment to part‑timers, because they incorrectly, we submit, assumed that there was an agreement at the point of engagement as to the number of hours that would be worked each week. There is no such requirement and, indeed, this clause suggests that. The award accepts that there will be different hours worked a week, because in 4.6(4), when talking about leave benefits and how you calculate them, it says:
In each instance, the proportionate entitlement shall be determined by dividing the average number of hours worked each week by 38 –
which suggests that there is not a set amount per week.
McHUGH J: It has to be a minimum of 15 hours, though, has it not?
MR MARTIN: The minimum, yes, but anywhere between 15 and 32 could be worked. Then the final clause which is of relevance is the one with which there has already been discussion – 4.7. For the reasons I have already advanced, we say that it deals with the matter in a way which suggests that there is a set of ordinary hours for casuals and overtime for casuals also.
Could I take your Honours quickly to the decision, the reasons for which appear at page 101 to 110 of the appeal book. The first pages are ‑ ‑ ‑
McHUGH J: Just before you do that, does it matter for your purposes whether they work overtime or not? Is not the critical matter, from your point of view, that it is only their payment for their ordinary hours of work that is critical? They may work these extraordinary hours which have to be paid at overtime rates, but it is irrelevant whether you define it as overtime, is it not?
MR MARTIN: Well, it is important because the definition of the type of work being done, whether it be an ordinary hour or an overtime hour, determines the amount of the contribution.
McHUGH J: Why do you say that?
MR MARTIN: Well, it is said against us that casuals only work ordinary hours, and that even though they are paid overtime rates, that is still an ordinary hour and, therefore, comes within the calculation.
McHUGH J: I understand that argument, but that was not what I was putting to you. I was putting to you that they may have for the purpose of this award ordinary working hours and extraordinary working hours, but they are not overtime. Clause 4.7 itself seems to take the view that they have ordinary working hours, over a spread of ordinary workers, but they nevertheless may work outside and they are to be paid for those hours at overtime rates. I did not know whether anything turns on whether to describe it as overtime or not, except I suppose you seek to get some benefit from the third sentence in clause 3.5(3)(d).
MR MARTIN: Yes, because, your Honour, we point to the manner in which overtime is defined in 4.2. It is defined as the fact that you are paid these rates. As I said earlier, it is not that you are working extra hours or longer hours, it is the fact that you are working in particular hours and you are paid particular rates, that you receive an overtime payment.
McHUGH J: Yes, but leaving aside the special terms of this award, it would never have occurred to me that casual employees have overtime. In fact, the very nature of casual employment is generally regarded as a denial of the notion of overtime because they work all sorts of odd hours which to ordinary people would be overtime, but it does not seem to me to weaken your case to accept that because the critical definition of “ordinary time earnings” is your rate of pay for ordinary hours of work. That is defined, on one view of this award, in a particular way: 6.30 Monday to Friday and on a Saturday. So they are the ordinary hours of work. But 4.7(3) enables them to be paid for time worked outside that, at overtime rates, although it may not be regarded as overtime rates. You assert 4.2 applies to casuals. Maybe it does not but it is effectively picked up by 4.7(3) ‑ ‑ ‑
MR MARTIN: As Justice Hayne asked me to assume earlier, if 4.2 did not apply could we still find a way of attaching ordinary hours to casuals.
McHUGH J: Yes.
MR MARTIN: It would be using 4.7(3) and 4.1 where we would say we can.
McHUGH J: Yes, that is what I was saying. It does not seem to me it is decisive against your case that 4.2 does not apply to you.
MR MARTIN: We would accept that, your Honour. The argument as we understand it is that 4.1 does not apply to us.
McHUGH J: Yes.
GLEESON CJ: Mr Martin, I realise this is not directly in issue but 3.5(3)(d) says:
Ordinary time earnings shall not include . . . penalty rates for public holiday work ‑
Whether it is a casual employee, or a part‑time employee or a full‑time employee, if somebody works on a public holiday, does what they are paid for that come within “ordinary time earnings” to an extent but not to some other extent?
MR MARTIN: We would submit not. There is an authority referred to by our learned friends which deals with the question of whether penalty rates is a notion that is divisible, if I understand your Honour to be dealing with it in that way.
GLEESON CJ: Yes.
MR MARTIN: Whether you can look at a penalty rate and say that the normal rate is $10 an hour but the penalty rate is $25 an hour, but the actual penalty is only the additional 15. Now, that was considered by the Court of Conciliation and Arbitration in what is called sometimes the Weekend Penalty Case. It is in the bundle that the respondent has provided at point 4.
GLEESON CJ: And what was the outcome?
MR MARTIN: The outcome was that the majority decided that penalty rates was indivisible. This was a case involving wartime regulations, and whether they could adjust penalty rates and they decided that penalty rates was a notion that encompassed the entire payment and not a part of the payment.
GLEESON CJ: Well, now, applying 3.5(3)(d) of this award, if an employee, whether casual or full time or part time, works on a public holiday, what are the consequences of that in terms of superannuation contributions?
MR MARTIN: No contribution would be made for any amount paid for that day, but – and I have to say “but” – a full‑time employee is entitled to receive payment for 38 hours of that week, so that you get a penalty payment on top of your 38 hours. They are still receiving a superannuation contribution as a full‑time employee for 38 hours. If they work Anzac Day, then they receive a penalty payment on top of that, but the penalty payment is not amenable to the charge or the contribution.
GLEESON CJ: I just wondered whether that was the sort of thing the Full Court had in mind.
MR MARTIN: It appears more, your Honour, in their reasoning, that they based it more upon the notion that a casual does not receive an actual or ordinary weekly wage and for that reason they do not work overtime.
GLEESON CJ: And the complaint of your opponent is that they are right in the first step there but they did not take it through to its logical conclusion?
MR MARTIN: That is so, yes. If I could briefly go to what their Honours said. Effectively it is this, that a full‑time employee working an overtime hour with a casual employee working an overtime hour, the full‑time employee receives nothing for the overtime hour by way of superannuation. The casual, on the Federal Court’s reasoning, receives a payment which applies to the ordinary rate for that hour, not the overtime rate.
GLEESON CJ: That is to say, what you would have been paid if you had worked that hour during ordinary working hours.
MR MARTIN: Well, in fact, that is what their Honours say at page 109 at about line 12 in paragraph 26. They say:
As we see the matter, there is nothing in the definition in clause 3.5(3)(d) which would exclude from “ordinary time earnings” that portion of casual employees’ remuneration working in overtime periods to which they would have been entitled if they had not worked “outside or in excess of” ordinary working hours.
So they are saying, in effect, you do not exclude it even though they are working in overtime periods because you regard it as if they are not working in overtime periods.
GLEESON CJ: Well, for the person who works between 10 pm and 11 pm, you ask what they would have earned if they had worked between 10 am and 11 am on Saturday and you treat that amount as the ordinary time earnings component of what they were paid for working between 10 pm and 11 pm.
MR MARTIN: Yes, effectively, and the superannuation contribution attaches to that and not to what the court calls the increment or the enhancement.
HAYNE J: In that respect, is anything made of the expression in the award “actual ordinary rate of pay” by their Honours?
MR MARTIN: No, they appear to be more concerned with the part of the award which talks about overtime being paid in addition to the actual or ordinary weekly wage and that is the second sentence in 4.2(1):
payments shall be in addition to the actual or ordinary weekly wage paid to each employee.
And they deal with that on page 108 of the appeal book and they say in paragraph 23:
Full-time employees are engaged on a weekly basis. Subject to clause 4.6, the provisions of the Award relevant to weekly employees apply to part-time employees. Consequently, both full‑time and part-time employees can be seen to have an actual or ordinary weekly wage. For the former this is based on a 38 hour week. For the latter it will be based on the number of hours agreed upon at the time of engagement.
As I have already submitted, that is an error. There is no requirement that there be any agreement as to a fixed number of hours at the point of engagement. They then go on to say:
A significant result of that circumstance is that, when a full-time or a part-time employee works either type of overtime, he or she receives an overtime payment in addition to his or her actual or ordinary weekly wage.
That, with respect, is effectively ignoring 4.1 and the expression of what an ordinary hour is and the spread and so on. It assumes, incorrectly we submit, that there is a fixed wage being paid to a part-time employee, when a part-time employee can work within that range of 15 to 32. Their Honours then seek to distinguish casual employees at the foot of page 108 in paragraph 24:
The situation of casual employees is different. They are paid by the hour.
With respect, part-time employees are also paid by the hour. Clause 4.6(3) says that they are paid an hourly rate.
HAYNE J: Their Honours in the passages you have just been taking us to appear to be focusing on the rate of pay to the exclusion of in paragraph (d) the definition of “ordinary time earnings”, the words “receives for ordinary hours of work”.
MR MARTIN: Yes, “receives for ordinary hours of work” has particular meaning for part‑timers because they have a capacity to work different hours in a week. I would have to say to your Honour that the award does say that, notwithstanding that a full-time employee might work 60 hours one week and 20 hours the next week, the award provides that that employee is to be paid at the rate of 38 hours a week. So there is that provision there that does make a difference for full-time employees.
In considering what the Federal Court thought was the difference between casual and other employees, they say at the foot of page 108:
it is only that increment in the rate, multiplied by the relevant number of hours, which constitutes the overtime payment for the casual employee concerned.
Now, with respect, that does not fit with the definitions in the award. It says, 4.7(3):
time worked outside the spread . . . shall be paid for at overtime rates –
and the rate is, we would submit, an indivisible notion. There is “a primary entitlement” they then refer to and then in the third line on page 109:
Then the casual employee has an additional entitlement to an overtime payment, brought about by enhancing the hourly rate. It is only that additional entitlement that may properly be described as an overtime payment. Only that additional entitlement is attributable to the fact that he worked hours are “outside or in excess of” the employee’s ordinary working hours.
That does not sit, we submit, with the requirement to pay at overtime rates. The requirement is not to pay ordinary hours plus something else. The requirement is to pay overtime rates, which takes you back to 4.2.
Now, their Honours did make reference to the possibility that a casual employee could work outside the spread all the time and would not receive any contribution. That is not correct in the sense that there would be something paid because the Act would require no contribution having been made by the employee for the employer to pay the charge. Their Honours then went to the next section which might be situation where a casual works one hour ordinary time and 10 hours overtime, where the contribution for superannuation attaches only to the ordinary hour. We accept that that is the consequence of the interpretation for which we contend.
GLEESON CJ: I assume that as a matter of practice in some occupations the concepts of casual employment and working outside ordinary hours are closely related. You would employ casuals to work outside ordinary hours.
MR MARTIN: Yes, your Honour. That is mentioned in some of the supporting material for the Act itself, that that occurs.
KIRBY J: But it is not necessarily so. I mean, the two circles do not coincide.
MR MARTIN: They overlap but they do not coincide.
GLEESON CJ: But if it is so in some cases, it would mean that there are some cases in which casuals would never work within ordinary working hours.
MR MARTIN: That is possible, yes. That would lead, on our argument, to no superannuation contribution being paid by the employer pursuant to the award.
KIRBY J: That seems to undermine the overall purpose of the legislation. I have just been glancing at some of the parliamentary debates that are collected in the respondent’s materials. It does not seem to fit in with – I mean, in the end, it has to be a matter of construing the award and the statute, but that result for which you argue does not seem to fit in very comfortably with the overall ‑ ‑ ‑
MR MARTIN: We accept that, your Honour, but our answer is this, if it please, that if that were to occur - and in the facts in this case there is no evidence that that occurs and it is not suggested - the answer is not to construe the award in the way in which the Federal Court has done; the answer is to vary the award. We have referred in our written submissions to a decision of Mr Justice O’Mara in Australian Workers Union v Abbey (1939) 40 CAR 494 at 495. It is a very brief part which I will read. He says:
To give the words of an award a meaning they cannot properly bear will only mislead and confuse people who have to work under and apply the award. If it is claimed that the award upon a proper construction is unjust or does not carry out the intentions of the parties or the Court the proper method of remedying the matter is to apply for variation.
We would submit that that is the correct approach when an extreme example is found to work an injustice because an award, as we have said in our submissions, is not like a statute. An award, as your Honour Justice Kirby said, is worked out after compromises are made. One cannot, at this remove easily determine the balance within the award. One may not be able from the award itself to determine why a particular obligation is imposed or a benefit conferred.
HAYNE J: Would you accept though that it would be an unusual award that provided for superannuation benefits for employees on a basis that pejoratively might be described as random according to their shift patterns, or if that is a little too tendentious, Mr Martin, rather less tendentious is to say it would be an unusual construction of an award to say that the nightshift casual earns no superannuation whereas the dayshift casual gets 3 per cent.
MR MARTIN: We would answer that in this way, your Honour. If that occurred, if you did have a night shift, for example, then one would expect that there would be a provision, an agreement made between the union and the employer as to working of shifts which would deal with that, because when shifts are worked, shifts become ordinary hours with a shift loading, and that is ‑ ‑ ‑
HAYNE J: You quite properly deflect the thrust of the question by my use of the expression “night shift”, Mr Martin, quite properly you defect it, but the fact is there will be some casuals who will do their work at night and there will be some casuals who will do their work at day, and the night workers will not get super and the day workers will. An unusual result, is it not?
MR MARTIN: An unusual result, and the solution is to vary the award because, with respect, your Honour, one cannot necessarily know – as I said before – the balance that has been used to arrive at the award.
KIRBY J: Well, that is one solution. The other solution is to interpret the award to avoid that result if that interpretation is available fairly on the language ‑ ‑ ‑
MR MARTIN: If it is available fairly on the language, but we, of course ‑ ‑ ‑
HAYNE J: And can I proffer you one?
MR MARTIN: I beg your pardon?
HAYNE J: Can I proffer you one for your contemplation? Clause 4.7(2) identifies the rate of pay for a casual, hourly rate, which is divide the weekly rate of the appropriate classification by 38 plus 22 per cent. So you know what the rate is for a casual. If you go from there back into the definition of “ordinary time earnings” you have a figure which can be identified as something called “the actual ordinary rate of pay” – and I interpolate words “that would be received” for ordinary hours of work by that casual. Is that right?
MR MARTIN: Yes.
HAYNE J: The obligation under 3.5(2)(a) is to pay 3 per cent of employees ordinary time earnings. Now, that cannot be done simply by taking 3 per cent of a rate, cannot it, in the case of a casual?
MR MARTIN: No.
HAYNE J: You have to have hours actually worked injected into the calculation somewhere. Do you accept that?
MR MARTIN: Yes, your Honour.
HAYNE J: If you do that, why should not it just be 3 per cent actual hours worked by rate thus identified. Where in the words do you invite attention to whether the work is within or without ordinary spread?
MR MARTIN: Because earnings are defined as not including overtime, and while we accept that the contributions based on earnings and not a rate, the rate determines the earnings and if part of the earnings – the total weekly earnings – has been arrived as a result of receiving an overtime payment, based on an overtime rate, then it is not included, because they ‑ ‑ ‑
HAYNE J: And no part of it is?
MR MARTIN: No part of it is. If I might go briefly now to the argument advanced, so much of it as I have not dealt with, by the respondent and the cross‑appellant. The argument is on both the respondent’s submissions and under the guise of the cross‑appellant, as I have already stated, all hours worked by casuals are ordinary hours, that is, the gist of their argument if they are wrong there then their argument falls.
There are five points that we wish to make in response to that. One we already have made, with respect, to 4.7(3). It indicates that there are defined hours which if worked by casuals will be overtime. Secondly, the award discriminates between hours that are paid as ordinary and hours that are paid as overtime, and it cannot sensibly be construed, we submit, that one should treat an overtime hour, worked by a casual, as an ordinary hour when it is not remunerated as an ordinary hour and that is the test under the award. You have hours within which ordinary hours are worked, and then you have the test applied if you pay more, it is overtime.
Thirdly, if the respondent’s contention was correct that casuals could only work ordinary hours then you would not need the reference in 4.7(3) to “all time worked outside the spread of ordinary working hours”. It would simply say something else. It would say “all time worked in excess of 8”, or “all time worked in excess of 38”. But it specifically acknowledges that casuals do work within the spread of ordinary working hours and therefore would be paid for that at the ordinary rate.
Fourthly, the expression “casual rates received for ordinary hours of work”, as used in 3.5(3)(d), should not be read as if it meant “all casual rates for all hours worked”. Clause 3.5(3)(d) specifically draws the reader’s attention to “ordinary hours of work”. If there was to be no distinction, then they would simply say “casual rates received for work”.
Fifthly, if the respondent’s contention is correct, then it is, we would submit, inexplicable that the award should not qualify its exclusion of overtime in the ordinary time earnings definition to exclude overtime rates earned by casuals. We say inexplicable because there is a number of areas where casuals are explicitly excluded. Clauses 4.1(1)(b)(ii), 4.1(1)(h), 4.1(4), 5.1(1)(a) and 5.3(1) are all instances where casuals are explicitly excluded.
The meaning of “spread of ordinary working hours” is something that has been dealt with in argument. May I summarise it in this way, so far as 4.7(3) is concerned. Clause 4.7(3) has an internal reference back to 4.1(1)(f). That is an indication that 4.1 itself should apply. Clause 4.1(1)(b) itself deals with all employees, save where there is an explicit exclusion, in relation to casuals, as I have already mentioned, in 4.1(1)(b)(ii) and 4.1(1)(h). Clause 4.1(1) repeatedly uses the expression “ordinary hours of work” and does so interchangeably with the expression “the spread of ordinary working hours” and a reference to 4.1(1)(b), (e).
Your Honours, we have dealt with a number of specific points made by our learned friends in their submissions in our own outline, and we have done it in some detail. Unless your Honours wish me to go to them now, we would be content to rest upon those written submissions.
GLEESON CJ: Yes, thank you, Mr Martin. Yes, Ms Batrouney.
MS BATROUNEY: If the Court pleases, I would like to begin our submissions by drawing the Court’s attention to the intention and purposes behind the Superannuation Guarantee legislation, as reflected in the relevant award.
Could I take the Court first to the decision of his Honour Justice Gray in Quest Personnel Temping Pty Ltd v Commissioner of Taxation (2002) 116 FCR 338. Could I ask the Court to turn to page 343 at point 1. There his Honour says:
The Act ‑
that is the Superannuation Guarantee Act ‑
is not a piece of ordinary taxation legislation. Its primary purpose is not the collection of revenue. It is designed to provide a system under which employers are encouraged to make payments to superannuation funds for the benefit of their employees. An employer who fails to make such contributions will be forced to pay an amount equivalent to the shortfall in contributions to the respondent by way of superannuation guarantee charge. The underlying object of the legislation is to benefit employees. The construction that favours this underlying object should be preferred to any that does not. A strict construction, such as might be adopted for ordinary taxation legislation, is inappropriate.
KIRBY J: That is also now a question of some controversy, is it not, whether the so‑called strict interpretation is appropriate tax legislation?
MS BATROUNEY: Yes, your Honour. The courts have moved on from that ‑ ‑ ‑
KIRBY J: It is just another piece of legislation as far as I am concerned.
MS BATROUNEY: Yes, the courts have moved on from that now.
KIRBY J: I think something was said about that in the joint reasons yesterday in ‑ ‑ ‑
MS BATROUNEY: Austin v The Commonwealth, yes, your Honour. The legislation is designed to allow for a full operation of the award. If I could take you to the statement by the Treasurer of the Commonwealth which is in our supporting material at tab 10, that is the information paper dated December 1991 issued by the Treasurer regarding the superannuation guarantee levy. Could I take the Court to page 13 of that, which is the first page extracted. You will see there at paragraph 3.25 the Treasurer says:
The SGLA will operate independently of, but in conjunction with, the award system. Award superannuation support provided by employers will count toward the prescribed level of superannuation support. So long as the total level of employer support in respect of the employee under any complying superannuation scheme(s) meets the prescribe minimum standard, the Levy will not be payable.
So the Guarantee Act is intended to work together with the award system. In relation to this, could I also take the Court to the Superannuation Test Case, so-called, (1994) 55 IR 447. Could I take the Court to page 463 at point 8. You will see under the heading there. “2 – Award superannuation provisions” it is said that:
The preceding comments emphasise that the enactment of the SGA Act and the SGC Act has established a new regime with respect to employer provided superannuation. It is in the context of this new regime that the approach to be taken by the Commission with respect to superannuation must be considered.
The second matter that I wanted to underline is that the intention of the legislature was that all employees would be covered.
Could I now take you to the second reading speech, which is in our supporting materials at tab 11. I will take the Court just briefly to a few extracts which underline the fact that it was the intention that all employees have access to superannuation. Firstly, at page 1763 on the right-hand column at point 7, the Treasurer states:
Despite these reforms, there is an ongoing need to ensure that as many Australians as possible have access to superannuation.
Over the page at page 1764, the left-hand column at point 3, the Treasurer says:
The levy . . . It will ensure that, by the beginning of the next century, virtually all employees will be accumulating substantial superannuation savings to help fund their retirement income.
HAYNE J: Accepting that that is the purpose of all this, what are we to make of it? What is the proposition to which you are coming?
MS BATROUNEY: The proposition to which I am coming is that the intention of the legislation and the award itself was that all employees would be covered and that some class, such as night casual workers, as your Honour Justice Hayne pointed out, ought not to be excluded from the blanket coverage that was intended by both the legislation and by the drafter of the award.
KIRBY J: But because it is picking up awards and because awards are not typically drafted or all drafted with the precision of legislation, there is always the risk that there will be a slip or that the overall purpose of the legislation will not be achieved in a particular case. The most that this softening up of the Court that you are doing now can do is to say that if you get to a point where you are trying to work out whether the two work together, it is relevant to take into account the overall objective of the legislation that there should not be irrational or unreasonable exclusions, that being the object that is to be attained. But in the end, the job is one of construing the two together, is it not?
MS BATROUNEY: Exactly, I can take it no further. The only other matter I was going to draw the Court’s attention to is that in the Act there are specific exclusions for, for example, domestic workers who work under 30 hours, people over 50 years of age, et cetera. So there are specific exclusions. Now, obviously, casuals ‑ ‑ ‑
KIRBY J: Over what age?
MS BATROUNEY: I am sorry, I think it was over 70.
CALLINAN J: Over 65, is it not, and I think soldiers and people like that.
MS BATROUNEY: There are a whole number. In section 28 of the Act ‑ ‑ ‑
KIRBY J: People of 50 are extremely young.
MS BATROUNEY: Of course, your Honour. It is 65.
KIRBY J: Still young.
McHUGH J: But does the construction of the legislation help all that much? I mean, one does not need much experience of negotiation of awards to know that people lobby for positions, there are trade-offs and sometimes disagreements which are expressed by language in high levels of generality, people saying, “Well, we will settle that or we will get the court or somebody to settle it.” It is very difficult to use purposive interpretation to awards unless you know the actual background of it.
MS BATROUNEY: That is true, and ‑ ‑ ‑
KIRBY J: I thought there was a passage in Justice Dixon that is quoted that said that even in those days, you would give a more generous or purposive construction to an award precisely because of the fact that it is not drafted with technical precision.
MS BATROUNEY: Is that ‑ ‑ ‑
KIRBY J: I thought that was in one of the written submissions, I think it was in yours. It was a passage in a judgment of Justice Dixon. Anyway, do not worry about it, it will come up somewhere.
MS BATROUNEY: What your Honour says is obviously the case, that there are compromises made and my learned friend makes that point, but we would submit that it was the clear intention of the draftsman of the superannuation provision in the award when it was inserted that the coverage be extended to all eligible employees, that it meant what it said, that all employees ought to be ‑ ‑ ‑
McHUGH J: The Act may have intended that but the question is ‑ ‑ ‑
MS BATROUNEY: Sorry, that was in the award.
McHUGH J: Yes.
If I could take your Honours to the actual award itself at page 20, you will see at clause 3.5(2), as my learned friend has already taken you, that:
Every employer shall contribute on behalf of each eligible employee . . . 3% of the employee’s ordinary time earnings –
Now, if the Court will go down to the foot of the page you will see:
“Eligible employee” shall mean any employee who has been employed by the employer during 5 consecutive weeks and who has worked a minimum of 50 hours –
So it is to apply to all employees – each employee – subject to a qualifying period. What the Commissioner has to establish in order to succeed in this case before the Court is that firstly the casual rates are received for ordinary hours of work and, secondly, that what a casual receives is not overtime. We would submit that where one starts is to try and work out what are ordinary hours. Why is that word “ordinary hours” in the definition of “ordinary time earnings” and what does the phrase “ordinary hours of work” mean? Now, in Kezich the High Court held that “ordinary hours” mean usual hours. If I could take the Court to the decision in Kezich.
McHUGH J: We took a different view in Catlow.
MS BATROUNEY: Yes, that is correct, your Honour. But, all of Kezich, Catlow and Scott, were, as my learned friend point out, workers compensation cases. In Kezich (1974) 131 CLR 362 it was held that ordinary hours mean usual hours and that those hours include overtime. Interestingly, it was also held that ordinary hours are not hours for which overtime is not paid. So, contrary to what my learned friend submits, simply because overtime is paid does not mean that they are not ordinary hours. If I could take the Court to ‑ ‑ ‑
CALLINAN J: But the purpose is different, is it not, under the workers compensation legislation? The purpose is to compensate the employee for what, on the balance of probabilities, he or she would have lost.
MS BATROUNEY: Yes, it is using the past as a yardstick to measure the future and so ‑ ‑ ‑
CALLINAN J: But for an entirely different purpose.
MS BATROUNEY: It is for an entirely different purpose. Kezich stands on its own in deciding that “ordinary” means usual. Both Scott and Catlow decided that “ordinary” means the hours that are prescribed in the award – the prescribed or fixed hours. That is why we say in this case that a casual cannot have any ordinary hours because there are no hours prescribed or fixed for casuals where there are hours prescribed or fixed for both full‑time employees and for part‑time employees.
KIRBY J: Some little support for that might be gained from the intended interrelationship of the Act and awards and the award system.
MS BATROUNEY: Yes.
KIRBY J: If you had the choice between whether “ordinary” means usual or “ordinary” picks up an award interpretation, this is a piece of legislation that was intended to act in interrelationship with the award system.
MS BATROUNEY: Yes, it is, and neither side contend that “ordinary hours” means “usual hours” in the sense of “customary hours”.
GLEESON CJ: You say neither side contends that?
MS BATROUNEY: Neither side contends that.
HAYNE J: How then do you construe the expression in the definition of ordinary time earnings, “casual rates received for ordinary hours of work”? What meaning do you give them?
MS BATROUNEY: We construe “ordinary hours” to mean the hours that are prescribed in the award for that category of employee. So for a full‑time employee it is 38 hours a week. For a part‑time employee it is 32 hours per week. For a casual it is by the hour.
HAYNE J: I am not making myself plain, I fear, Ms Batrouney. Can you go to the definition of “ordinary time earnings”. Do you have that in front of you?
MS BATROUNEY: Yes, I do.
HAYNE J: The end of line 3 of that, you have the expression, “casual rates received for ordinary hours of work”. What does that composite expression mean?
MS BATROUNEY: It means that the casual rates received for the ordinary hours, if any, that are prescribed in the award. Now, there are no hours prescribed for casuals in the award. So every dollar the casual receives is a casual rate received for an ordinary hour of work, because there is no number of hours prescribed for a casual as there are for a full‑time employee and as for a part‑time employee. A casual is regarded ‑ ‑ ‑
CALLINAN J: You say absent prescription everything is ordinary?
MS BATROUNEY: Yes. I concede, as Justice Callinan pointed out, that they were in a different context, but that is exactly what Scott and Catlow decided, that ordinary hours are the hours that are prescribed in the award. When we look through this award we see that there are ordinary hours prescribed for full‑time employees, that is 38 hours a week, 10 hours a day, and there are ordinary hours prescribed for a part‑time employee, that is, a maximum of 32 per week and eight per day, but there are no ordinary hours prescribed for a casual.
GLEESON CJ: What if a casual works on a public holiday and is paid penalty rates for public holiday work. How does that fit in?
MS BATROUNEY: We would still say that that is an ordinary hour of work, and the ‑ ‑ ‑
GLEESON CJ: It is not “ordinary time earnings” as defined, is it? It is specifically excluded from the definition of “ordinary time earnings”.
MS BATROUNEY: The penalty rates.
GLEESON CJ: Penalty rates for public holiday work.
MS BATROUNEY: If the casual did work on a public holiday, then the definition would specifically exclude the penalty rate aspect of the hours worked, but we would ‑ ‑ ‑
GLEESON CJ: And would exclude all the remuneration that you receive for working on the public holiday or only part of it? If so, what part?
Well, there are cases that say that you cannot dissect the penalty rate, and so we would have to say that it was only the penalty rate aspect of it that would be excluded by that particular exclusion, but we would not say that that would impact on what we would otherwise say about overtime or what we would otherwise say about ordinary hours.
CALLINAN J: Ms Batrouney, could I draw your attention to 3.5(2)(c) of the award, which really does contemplate, I think, that there will be ordinary times or ordinary working times, if you like, ordinary hours of work, for a casual employee because it refers to “ordinary time earnings”, and that must be a reference distributively to each of full‑time, part‑time, casual, adult or junior employees. Do you follow what I am asking you?
MS BATROUNEY: Yes I do. We say that casuals do have ordinary time earnings, and that is defined ‑ ‑ ‑
CALLINAN J: How do you work out ‑ what are extraordinary time earnings for casual employees?
MS BATROUNEY: There are no extraordinary time earnings for casuals.
CALLINAN J: No? So everything is an ordinary time earning?
MS BATROUNEY: Yes.
CALLINAN J: You would not need then a reference, would you, to casual employees in (c), would you, if that is ‑ ‑ ‑
MS BATROUNEY: It is simply saying in that clause – all it is simply saying is that if your ordinary time earnings do not exceed a base threshold then the guarantee is not payable. It is a minimum level of earnings clause. We would say that would still apply to casuals. Casuals still do have ordinary time earnings, and if the casuals ordinary time earnings, which we say is every dollar they earn, is below that 35 per cent then, yes, the charge is not payable. So that clause 35(2)(c) does have to work to do for casuals.
CALLINAN J: It rather suggests though, does it not, the possibility at least of differential hours and differential earnings for casual employees? That is ordinary time, that is the hourly rate plus 22 per cent, and then overtime for extraordinary hours.
MS BATROUNEY: Yes. Well, our approach, your Honour, is to go to the actual definition of “ordinary time earnings” and so far as we can see there are two things that we must establish. One is that the dollars in question are paid for ordinary hours and, secondly, that they are not overtime. We establish that they are ordinary hours by saying ordinary hours are those hours prescribed in the award. You have a prescription for full, you have a prescription for part-time – which, by the way, is different – and then there is nothing for casuals. They are engaged by the hour; that is their prescription. So we say that every hour worked by a casual is an ordinary hour.
Next we have to establish that what would for other categories be overtime is not overtime for a casual, and again we do that by reference to prescribed hours. Overtime is time in excess of the hours that are prescribed. What is prescribed for casuals? We have 38 hours for full time, we have 32 for part time, we have by the hour for casuals, and that is how we say every hour is an ordinary hour.
CALLINAN J: Yes, I can see the argument.
KIRBY J: If one looks at the purpose or structure of the award and the operation of the Act upon it, then one might think that ordinary hours are, as it were, singling out the standard or limited regular hours that will be worked and not including the others. Then if you apply that concept to casual workers, it is difficult to apply it, but you want to say that you pick up all hours worked, whereas with an ordinary employee, part time or full time, the scheme of the Act is not to pick up all but to pick up a part of all.
MS BATROUNEY: Yes.
KIRBY J: Now, is there a disharmony between the scheme of the Act that you are urging on us, that you pick up all, with the fact that for full-time and part-time ordinary employees you only pick up part, the core, as it were, of their working time?
MS BATROUNEY: Yes, well, with full-time and part-time employees, they will always get some superannuation contribution because there is ordinary hours. They will always get that contribution on their ordinary hours. Now, yes, there is disharmony between the categories of employees. A full-time employee will not receive superannuation after 38 hours. A part-time employee will not receive superannuation after 32 hours. So, quite clearly, the intention of the award is that there will be differing treatment between categories of employees, but why is it that a casual ought to get superannuation on every hour that they worked? The answer is simply that it is that or they get nothing.
KIRBY J: Perhaps one can add “and typically they may be expected to work a shorter core time” so that ‑ ‑ ‑
MS BATROUNEY: There is no core time for them.
KIRBY J: No, but they will be working shorter than the core time of part‑time and full‑time ordinary employees.
MS BATROUNEY: Yes, one would expect that.
GLEESON CJ: When you say it is that or nothing, that is on the assumption of the Full Court of the Federal Court is wrong.
MS BATROUNEY: Yes, your Honour.
GLEESON CJ: Do I gather you do not seek to support the decision of the Full Court?
MS BATROUNEY: That is the cross-appeal, your Honour. We have cross-appealed ‑ ‑ ‑
GLEESON CJ: Do you seek to support the decision of the Full Court?
MS BATROUNEY: No. We have cross-appealed against the Full Court’s decision on those grounds.
GLEESON CJ: Yes, but you do not have an alternative position?
MS BATROUNEY: Our alternative position is that, as I have stated, all hours are ordinary hours and that there is no warrant in the – I agree with my learned friend that there is no warrant in the Act or the award for an incremental approach.
GLEESON CJ: So neither side before us seeks to support the decision of the Full Court of the Federal Court?
MS BATROUNEY: Yes, your Honour that is correct.
KIRBY J: That is why you both vigorously supported the grant of special leave.
MS BATROUNEY: Yes.
KIRBY J: Most unusual to see the Federal Commissioner of Taxation supporting the grant of special leave. But you had your cross‑appeal in mind.
MS BATROUNEY: Yes. The Commissioner is simply concerned to ensure that all employees are covered by superannuation.
HAYNE J: He is from the government. He is here to help us.
MS BATROUNEY: Yes. If I could just take the Court to certain matters within the award. My learned friend says that clause 4.1 prescribes ordinary hours for casuals. Now, clause 4.1 prescribes that:
the ordinary hours of work shall be an average of 38 ‑
Now, that is just simply inapposite to a casual.
McHUGH J: But how do you deal with 4.7(3), because the theory of that paragraph is that casual employees do have a:
spread of ordinary working hours –
or they may work outside that spread and that they are to be paid at the overtime rates.
MS BATROUNEY: Yes, your Honour, but we say that that does not make it overtime. Can I give you an example of why?
McHUGH J: That may be, but it does not mean that every hour worked by a casual is an ordinary working hour. Clause 4.7(3) appears to deny it in terms.
MS BATROUNEY: At the risk of repeating myself, that is where we say that an ordinary hour is what is prescribed, and there is nothing prescribed here other than in 4.7(1), that a casual is employed by the hour. That is the prescription, by the hour.
McHUGH J: Well, I know they are employed by the hour, but why do you not read 4.7(3) as in effect directing you to 4.1(1)(a) and (b) as to what are the ordinary working hours? They are 6.30 am to 6.30 pm Monday to Friday, 6.30 to 12.30 on Saturdays. 4.1(1)(b)(i) refers to “Such spread of ordinary daily working hours”, the very same term that is used in 4.7(3). So why is it not on the proper construction of 4.7(3) that a casual employee who works outside that has to be paid at overtime rates?
MS BATROUNEY: We would agree with that.
McHUGH J: You agree with that, yes. Nevertheless, if you work inside those hours – that is, if the casual is working 6.30 am to 6.30 pm Monday to Friday and on Saturday, then he or she is working in ordinary working hours.
MS BATROUNEY: Yes. We say that the spread of ordinary hours is that that is prescribed in clause 4.1. However, we do not say that what is an ordinary hour for a casual is in 4.1. Why should it be 4.1? Why should it not be what is prescribed for a part‑time employee? Why should it not be 4.6?
McHUGH J: Well, the answer may be to your rhetorical question – I hope it is rhetorical – that the term “spread of ordinary working hours” in this award is a term of art, and it is defined in 4.1(1)(b).
MS BATROUNEY: Yes, I agree with that, your Honour. It is just it would seem to me that your Honour is trying to extrapolate from that that therefore somehow that clause prescribes what is an ordinary hour.
McHUGH J: No, not an ordinary hour, but ordinary working hours, and then when you go to the definition in 3.5(3)(d), it is your rate of pay for your ordinary hours of work which are those hours that you work within 12 hours Monday to Friday or with several hours on Saturday.
MS BATROUNEY: Your Honour, we concede that 4.1 prescribes the spread but we emphasise that 4.1 does not prescribe what is an ordinary hour for a casual and one cannot, in our submission, use 4.7(3) as a springboard back to 4.1 any more than one can use it as a springboard back to 4.6. Your Honour is assuming that one implies from this that the ordinary hours of a casual are 38 hours per week, but that is not what is said in 4.1 and if one is simply fishing around to come up with a number, then why would one not go to 4.6 which prescribes a different number of ordinary hours for part-time employees?
HAYNE J: This may reveal the conflation that is occurring and that may need to be teased out. Can I put something to you, not for immediate answer, but for consideration over the adjournment? When you go to 3.5(2)(a), the base obligation, the employer shall pay. That tells you to pay an amount, an amount calculated in a particular way by the defined term “ordinary time earnings”. That invites attention to what it calls “ordinary rates of pay” which in the case of a permanent employee would be X dollars per week. In the case of a casual employee Y dollars per week. In the case of a casual the amount calculated in accordance with the casual provision with the 22 per cent loading.
Pausing the inquiry at that point, the definition of “ordinary time earnings” is not telling you any more than the rate. It is not telling you what has to be the multiplier of that rate to determine the amount that is to be contributed. Amounts are to be contributed monthly. So how many weeks has the full‑time employee worked – four, four and a bit, whatever it may be. That is the multiplier not found in the definition of “ordinary time earnings” unless you are giving the expression, “four ordinary hours of work”, where used in that definition, a meaning specific to the individual employee and identifying those hours, specific to the individual employee, by reference to the definition of spread and no more than 8, et cetera, that we find in 4.
The alternative view would be to read the award as simply assuming, without stating, that the calculation is to be founded on whether the employees worked the full month, part of the month, X days if a part‑timer, or so many hours, if a casual, and then apply the number of hours actually worked in the case of the casual to something that is identifiable as a rate of pay, a rate of pay payable for ordinary hours. Now, it seems to me that the argument thus far has tended to conflate what the individual has done into this concept of ordinary hours of work. That may be right. If it is, it seems to me to support Mr Martin’s argument. If it is not, it seems to me to lead you off to a rather different conclusion from that which you expressed to the Chief Justice. It would lead, it would seem to me, to supporting the Full Court of the Federal Court. I put a lot to you, and we are nearly at the adjournment, and for my own part I would be grateful of an answer after you have had a time to think about it.
GLEESON CJ: Ms Batrouney, just before we adjourn, the key paragraph in the reasoning of the Full Court is paragraph 24 on pages 108 to 109 of the appeal book. Do I gather from what you say that no party in the Full Court advanced an argument to that effect?
MS BATROUNEY: Yes, your Honour, that is correct. My hesitation is that as your Honour quite rightly pointed out with respect earlier on, we do support their proposition that they are paid by the hour and that every hour is an ordinary hour, but we do not support, and I understand neither side supports, the incremental approach that is identified in that paragraph.
GLEESON CJ: All right, is that a convenient time?
MS BATROUNEY: If your Honour pleases.
GLEESON CJ: We will adjourn until 2.15 pm.
AT 12.45 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.17 PM:
GLEESON CJ: Yes, Ms Batrouney.
MS BATROUNEY: Immediately prior to the luncheon adjournment, Justice Hayne asked me a question about the actual definition of “ordinary time earnings”. As I understand his Honour Justice Hayne’s question it was that the definition of “ordinary time earnings” in clause 3.5(3)(d) prescribes merely a rate. It does not prescribe an amount. By this I say:
“Ordinary time earnings” shall mean the actual ordinary rate of pay the employee receives for ordinary hours of work ‑
et cetera. So without a multiplier it is in effect meaningless. As I further understand his Honour he was saying we need to cast about to find what that multiplier is. His Honour was saying if the multiplier is all hours that the casual works then that heads towards the Full Court exposition. However, if it is limited to the spread of hours or what is prescribed as ordinary hours for full‑time employees then that heads towards my learned friend’s exposition of it. However, as I understand what his Honour Justice Hayne was saying is that that rate will always be the 22 per cent rate. So it is either 22 per cent of all hours or 22 per cent of the hours within ‑ or not in excess of the spread.
Our answer to that is that although ordinary time earnings is on its face a rate, it cannot in reality be that. We say that for a number of reasons. Firstly, it is ordinary time earnings and earnings are not a rate. Earnings are an amount. Secondly, we would say that if it was a rate there would be the exclusion for ‑ for example lump sum payments would be nonsensical because there is no way that a lump sum payment could be a rate. The final reason we say that despite what it seems on its face ordinary time earnings is not a rate, is that the reason we are looking at ordinary time earnings is that we have been sent there by the Guarantee Act which uses ordinary time earnings as a notional earnings base and that base cannot be a rate.
So for those reasons we say that if Justice Hayne was right in saying that ordinary time earnings was merely a rate, then we would have the difficulties postulated by his question, but we would say with respect that his Honour is incorrect in the construction that ordinary time earnings is in fact simply a rate.
Going back to our general argument, my learned friend has said that ordinary hours for a casual are prescribed in clause 4.1. Our submission is that that simply cannot be the case and we say that it cannot be the case for a number of reasons. Firstly, as I foreshadowed before the luncheon adjournment, the only way you could get clause 4.1 is by implying into clause 4.7(3) a reference back to clause 4.1 and we say that there is no warrant for doing that and if it is simply because clause 4.1 prescribes a number of hours, then why would not that number of hours be the hours prescribed for a part-time employee which is a different number of hours.
Secondly, we say that those clauses within clause 4.1 that specifically exclude casuals, that is clause 4.1(b)(ii) and clause 4.1(1)(h), the third paragraph thereof, are simply dealing with rates of pay and they do not touch upon the prescription of hours, that is the prescription of what is ordinary hours. So, for example, in clause 4.1(1)(b)(ii) it simply says that:
Ordinary hours worked by all employees, excluding casuals, on a Saturday between the hours of 6.30 a.m. and 12.30 p.m. shall be paid for at the rate of time and a‑quarter.
So it does not prescribe what is an ordinary hour; it simply prescribes the rate that is to be paid for that hour.
GLEESON CJ: Mrs Batrouney, as I understand it – correct me if I am wrong – most of the provisions in the award - perhaps all of the provisions in the award - that we have been looking at and are seeking to construe are not provisions aimed at working out how much superannuation contribution has to be made; they are provisions aimed at the much more basic question of how much employees are entitled to be paid.
MS BATROUNEY: Yes, your Honour.
GLEESON CJ: Now, from the point of view of a casual worker, what is the consequence in terms of those provisions of concluding that all the hours that are worked by the casual worker are ordinary?
MS BATROUNEY: If I understand your Honour’s implication to be that therefore no overtime is payable, that is not what we say. We say that all the hours they work are ordinary hours and some of those ordinary hours are remunerated at a higher rate, and if I might just ‑ ‑ ‑
GLEESON CJ: Because?
MS BATROUNEY: Because they are worked at a particular time or they are in excess of a certain number.
GLEESON CJ: That particular time not being ordinary time?
MS BATROUNEY: No, it is the time prescribed in 4.7(3) itself, and that is not prescribed as ordinary time. Can I take your Honour to an example within the award of the very thing we are talking about. If I could ask your Honours to have a look at page 25, clause 4.1(1)(b)(ii), which is the one I just referred your Honours to. You will see there it says:
Ordinary hours worked by all employees, excluding casuals, on a Saturday between the hours of 6.30 a.m. and 12.30 p.m. shall be paid for at the rate of time and a‑quarter.
Now this, your Honours, is an example of ordinary time that is being remunerated at an overtime rate that is not overtime. So for a full‑time employee who happens to work on Saturday between 6.30 and 12.30, which is within those hours that are prescribed for that full‑time person as ordinary hours ‑ ‑ ‑
GLEESON CJ: I am not sure that that is overtime. That is just saying, is it not, that ordinary hours on Saturday are remunerated at a higher rate than ordinary hours on Friday.
MS BATROUNEY: Yes, and that is what we say with casuals, that ordinary hours they work at certain times are remunerated at a higher rate, but that does not make it overtime.
McHUGH J: No, but does it not mean also, though, that in the case of the full‑time employer it would not come within the definition of “ordinary time earnings”, because it is not his actual ordinary rate of pay? It is a special rate of pay.
MS BATROUNEY: I would, with respect, disagree with your Honour. I would say that that would fall within ordinary time earnings for a full‑time employer. Your Honour, we would submit that the word “actual” there is simply there to pick up over‑award payments.
McHUGH J: I accept that, but what about ordinary rate of pay? You have to say that the 25 per cent loading on a Saturday is an ordinary rate of pay.
MS BATROUNEY: We would say that because it is within the ordinary hours and it is not overtime.
McHUGH J: Well, that is a bit difficult, is it not, to reconcile with 4.1(1)(h), the last paragraph:
All employees other than casuals shall be paid in addition to their ordinary rates of pay a loading of 25% for work within the ordinary spread of 38 hours –
Now, that is not within the definition of “ordinary time earnings”, is it?
MS BATROUNEY: We would say that that is yet another example, which I was about to take the Court to, of ordinary time that is remunerated at overtime rates that is not overtime.
McHUGH J: No, but it talks about “in addition to their ordinary rate of pay”, and ordinary time earnings takes its stand on the ordinary rate of pay. So it would seem to me at the moment, subject to what you say, that that 25 per cent loading is not within 3.5(3)(d) definition because it is not the actual ordinary rate of pay, it is something in addition to it in terms.
MS BATROUNEY: We would say that “ordinary rate of pay” is there in contradistinction to “overtime”.
GLEESON CJ: Can I just direct your attention to the second sentence of 3.5(3)(d). The terms includes, “casual rates received for ordinary hours of work”. What does that mean?
MS BATROUNEY: Yes. We would say that the reason “rates” is plural is because it is intended to pick up all the rates that the casual is paid under 4.7(3). I am not quite sure if that is what your Honour was referring to the plural or not, but also ‑ ‑ ‑
GLEESON CJ: It seems to be drawing a distinction between casual rates received for ordinary hours of work and casual rates received for other hours of work. Why would they talk about “casual rates received for ordinary hours of work” if all hours of work of casual employees are ordinary?
MS BATROUNEY: We would submit that, as I have said before, all hours of work of a casual are ordinary hours and that if this award prescribed hours of work for a casual, then hours worked outside those hours would not be ordinary hours. But this award has not prescribed ordinary hours for a casual.
McHUGH J: Do you concede that casuals have an ordinary rate of pay?
MS BATROUNEY: They have ordinary rates of pay.
McHUGH J: And is not their ordinary rates of pay that which is determined by 4.7(2):
Employees shall be paid an hourly rate by dividing the weekly rate of the appropriate classification by 38 and adding a loading of 22% thereto.
When you go to the definition of “ordinary time earnings” in the case of a casual, why do you not read that as saying that the ordinary rate of pay, 38 is the weekly rate of the appropriate classification, whatever the person is doing, divided by 38 plus 22 per cent, and that is received for the ordinary hours being 38 hours.
MS BATROUNEY: Because, your Honour, we say that ordinary hours are not prescribed for a casual. I understand that it is becoming circular, but that is our argument, that ordinary hours are prescribed for full-time employees, ordinary hours are prescribed for part-time employees, but there are no ordinary hours prescribed for a casual employee. The draftsman of this award has been quite careful in specifically stating what are ordinary hours for a full-time employee and what are ordinary hours for a part-time employee. Now, those are different hours.
McHUGH J: They may be, but the draftsman in 4.7(3) also seems to have assumed fairly plainly that casual workers do work outside ordinary working hours, because it says so in terms, and as the Chief Justice pointed out to you the second sentence in clause (d) adopts the same assumption.
MS BATROUNEY: It does, but as I say our argument is that there are no ordinary hours prescribed. We cannot explain away the word “ordinary” that the Chief Justice has pointed out except to say that it leaves open for the award to prescribe ordinary hours for a casual but it has not done so. Your Honour’s interpretation requires a far greater reading into clause 4.7(3) than does our interpretation of the definition of “ordinary time earnings”.
GLEESON CJ: But your argument then gives no content to the expression “casual rates received for ordinary hours of work”.
MS BATROUNEY: Except to say that we say that every hour that a casual works in an ordinary hour.
KIRBY J: It gives no special meaning to the second part of that formula.
MS BATROUNEY: Yes.
GLEESON CJ: That formula is used in close contradistinction, in the next sentence, to overtime.
MS BATROUNEY: Yes, it is.
GLEESON CJ: “It includes this. It does not include that.”
MS BATROUNEY: Yes.
CALLINAN J: And you would think that there would be some singling out or at least distinction made in 4.1(b) between casual employees and other employees if casual employees did not have ordinary hours and other hours. See, 4.1(b)(1) is referring to all employees, is it not?
MS BATROUNEY: Yes, and we have conceded that 4.1(b) does prescribe the spread of hours for casual employees.
CALLINAN J: There would be no need, would there, to be prescriptive of the spread of hours for casual employees if all of their hours were ordinary hours?
MS BATROUNEY: A certain number of those ‑ ‑ ‑
CALLINAN J: That is done ‑ what happens in 4.1(b) is to ensure that all employees can be get, among other things, not only that they will not be overworked or oppressively worked but also so that what are ordinary hours and what are overtime hours, which will attract higher pay, can be distinguished and properly remunerated.
MS BATROUNEY: Yes, and we say that casuals are remunerated for higher rates for certain hours of work but we say that because no ‑ ‑ ‑
CALLINAN J: It is difficult to regard those hours as ordinary hours, is it not? There is something special about them, for start. They attract overtime rates.
MS BATROUNEY: That is why I drew the Court’s attention to the two clauses within 4.1 that do give an example of hours that are remunerated at a higher rate but that are not overtime and that we would say are still ordinary time for full‑time and part‑time employees.
CALLINAN J: Just remind me, which are those two clauses, again?
MS BATROUNEY: At page 25, 4.1(1)(b)(ii) and 4.1 – it is probably easier to just say at the top of page 26, the second paragraph down.
CALLINAN J: I am looking at something different. Just what is its number?
MS BATROUNEY: I am sorry. It is the third paragraph of 4.1(1)(h).
CALLINAN J: Thank you.
MS BATROUNEY: While we are on that topic, the CFMEU Case was a case where it was held that in these similar circumstances, hours that are remunerated at a higher rate are not overtime hours. The CFMEU Case is in our supporting material at tab 7. If I could take the Court to page 7 of that decision, you will see at the top there under the heading:
SEVEN DAY CONTINUOUS SHIFT OPERATION –
there were three clauses set out there. It says:
Employees shall work a four shift seven day 42 hour per week continuous shift operation (subject to provisions in clause 46.4) –
which are not presently relevant.
23.2.2 The ordinary time hours of work for shift workers employed on the continuous shift operation shall average 38 hours per week.
Then clause 23.2.3:
The four hours in excess of 38 hours per week in the clause shall be paid at double time.
At paragraph [23] towards the bottom of the page at about point 8, Justice Munro says:
Moreover, pursuant to subclause 23.2, the four hours worked in a 7‑day continuous rostered shift in excess of 38 hours per week, although paid at double time (the same rate as overtime) are not expressly described as overtime in that subclause.
GLEESON CJ: And that may be because their primary obligation is to work a 42‑hour week, as appears from 23.2.1.
MS BATROUNEY: Yes, that is true, your Honour, but the point that I seek to get from this case is that simply because something is remunerated at overtime rates does not make it overtime and that is why we say in clause 4.7 in relation to casuals – 4.7(3) – that certain hours are remunerated at a higher rate does not make those hours overtime.
GLEESON CJ: I am not sure whether your argument is that there is no such thing as ordinary hours of work for a casual employee or that all hours worked by casual employees are ordinary. Which is it?
MS BATROUNEY: There must be ordinary hours for casual employees because the ordinary time earnings refers to ordinary hours for casuals, but as none are prescribed, then we say it follows that every hour is an ordinary hour for a casual.
GLEESON CJ: Which is a different thing from saying the concept of ordinary hours of work is simply inapplicable to the casual employee.
MS BATROUNEY: Yes.
McHUGH J: But the definition is elliptic, is it not? Ordinary time earnings is referring to an amount as paragraph 3.5(2) makes very plain. It is 3 per cent of the ordinary time earnings, but a rate of pay is not an amount. When it talks about “receives for ordinary hours of work”, is it talking about the theoretical ordinary hours of work or the actual hours of work? If a worker goes to work only two days a week for two days and has the rest of the time off for some reason or other, what are his ordinary time earnings?
MS BATROUNEY: We would say that it is the hours that are prescribed under the award, not the hours that are actually worked, and we would say that by reference to Scott and Catlow which I concede are workers compensation cases, but they were cases that considered the meaning of the words “ordinary time”.
McHUGH J: So does that mean that the employer has to pay a contribution in respect of hours which the employee may not work and indeed may not be paid for?
MS BATROUNEY: The employee may not work the hours – for example, if the factory was closed, a mechanical breakdown ‑ within a 38‑hour week there was a mechanical breakdown, so the employee only worked, say, 10 hours.
McHUGH J: Or goes on strike.
MS BATROUNEY: Or goes on strike. We would say that the charge is payable on the ordinary hours, that is the hours prescribed under the award, the 38 hours, and that he ought to be paid those 38 hours. So that he ‑ ‑ ‑
HAYNE J: Thus, if the employee takes leave without pay, the employer must continue to make superannuation payments.
MS BATROUNEY: That would be nonsensical, your Honour, that that would be the case. I have not considered whether or not that would fall within the ordinary time earnings, but we would say that if – there might be special provisions in the award that deal with leave without pay, but we would say ordinary time is the time prescribed under the award. We would not agree that ordinary time is the time that is actually worked or the time that is customarily worked.
GLEESON CJ: What is the time prescribed under the award for casuals?
MS BATROUNEY: There is no time prescribed under the award for casuals.
GLEESON CJ: Does not that lead to the conclusion not that all hours worked by casuals are ordinary but simply that the concept of “ordinary hours” has no application to casuals. I am not saying that is the right result but that is the logical consequence of your argument, is not it?
MS BATROUNEY: It is the logic consequence but we would say that that obviously cannot be the intended meaning. The intention of the occupational superannuation was to provide superannuation for all employees including casuals. We might debate whether it covers, as his Honour Justice Hayne said, night casuals, but certainly it was intended to cover casuals, and so it must have some operation in relation to casuals. So that is why we say that all hours are ordinary hours. When you think about it, it makes sense; a casual is engaged by the hour. A casual is not engaged for a 38-hour week or a 32-hour week or for a minimum of four hours. A casual is engaged by the hour, and so every hour he or she works is an ordinary hour for that casual.
McHUGH J: Can I take you back to your contention that “the actual ordinary rate received for ordinary hours” is referring to the award rate and not the hours actually worked. That does not fit in very well with the definition:
including shift loading, skill allowances and supervisory allowances where applicable –
How do you work those in? Because shift loading, in particular, will only apply when somebody has earned a shift loading.
MS BATROUNEY: Well, if, under the award, there has been an agreement that that employee work a shift – because the shift would only be by agreement of this award – then if that was his normal prescribed hours and the prescribed hours included the shift loading, he ought to be paid that, and superannuation ought to be paid on the loading.
McHUGH J: But you can only determine it by knowing whether or not the worker has worked it, can you not? Let us assume there is a shift loading of $10 a hour. The 3 per cent is only payable on that if a worker has actually worked it, is it not?
MS BATROUNEY: Well, we would say on the authority of, as I said, Scott and Catlow that “ordinary” means “prescribed” regardless of whether or not you worked it. For example, in Scott’s Case, the plaintiff usually worked 16 hours a week, but the prescribed amount was 38 hours a week, and it was the 38 hours that was held to be his ordinary time, not the time, the 16, that he actually worked.
McHUGH J: Those were in a workers compensation ‑ ‑ ‑
MS BATROUNEY: It was in a workers compensation – it is a different context.
CALLINAN J: Could I ask you something about clause 4.1(1)(c). Do the agreed facts make it clear whether casual employees worked their hours continuously or not? Could a casual employee work, say, 2 hours in the morning and, after another 4 hours, work 2 hours in the afternoon?
MS BATROUNEY: I am not sure. My learned junior informs me that it was on a roster.
CALLINAN J: Because (c) would suggest perhaps “ordinary daily hours” are only hours that can be and are worked continuously. That is perhaps to turn it around, but that is the effect of it, I think. Do you see 4.1 ‑ ‑ ‑
MS BATROUNEY: Yes, I do. There are a number of matters in clause 4.1 that we say point to the fact that this clause cannot apply to casuals, or is not intended to apply to casuals. That is why we are constantly saying that 4.1 does not prescribe ordinary hours for a casual. Can I take the Court to an example ‑ ‑ ‑
CALLINAN J: Except there is a special exception for casuals in 4.1(1)(b)(ii), which would suggest that but for that exception, or but for the period referred to in that exception, 4.1(1)(b) does apply to casuals.
MS BATROUNEY: Well, it does, and we would say that is simply there as an abundance of caution ‑ ‑ ‑
CALLINAN J: Then you have that other paragraph you drew my attention to, in (h), I think.
MS BATROUNEY: That is correct. If this clause refers to casuals, it must also refer to part‑time employees, and if that is the case then one must also ask why are all these provisions in 4.6 in relation to part‑time employment there as well?
CALLINAN J: Is there not specific provision otherwise for part‑time employees?
MS BATROUNEY: In clause 4.6, yes.
CALLINAN J: Clause 4(b)(1) is “subject to express provision otherwise” which is to be found in the case of part-time employees elsewhere, is it not? Clause 4.6 is what you say.
MS BATROUNEY: Yes, but, for example, there is clause 4.6(5) dealing with “Rest Pauses” which we say simply duplicates the clause in 4.1 dealing with rest pauses. Also 4.6(6) is also there, your Honour, and 4.6(6) is:
Subject to the provisions contained herein all other provisions of the Award relevant to weekly employees shall apply to part time employees.
Now, why would that be there if they otherwise applied anyway and why is there no similar clause for casual employees? These matters, we say, indicate that clause 4.1 where it prescribes ordinary hours, the number of ordinary hours, does not apply to casuals. The opening words of that clause are a good example, “shall be an average of 38”. It is nonsensical to refer to a casual’s ordinary hours as being an average of 38.
HAYNE J: What are the words to which you point in the definition of “ordinary time earnings” as translating a rate of pay into an amount of money on which the 3 per cent is then to be calculated?
MS BATROUNEY: As I mentioned to your Honours before, firstly, it is a definition of earnings which is an amount, not a rate, we would say; secondly, we say where it refers to “ordinary rate of pay the employee receives for ordinary hours of work”, we say that is a product, not a single concept. So we say it is the rate of pay they receive for ordinary hours of work. Rate times hours gives you a number. It is simply a different way of reading the same words. Your Honour is throwing up the interpretation that that is a single concept, that is, that it is a rate ‑ ‑ ‑
HAYNE J: I am asking you what words you say work the translation.
MS BATROUNEY: Yes, so it would be a ‑ ‑ ‑
HAYNE J: I think different conclusions may follow if the translation is assumed or implicit. It seems to me buried in this argument is a proposition that says that four ordinary hours of work is to be understood as four ordinary hours of work actually worked by the employee or some such expansion of it. I am not sure whether that is implicit. If it is implicit, I am not sure whether it is right, I just wanted to know ‑ ‑ ‑
MS BATROUNEY: Yes, we say it is the rate for the hours so rate times hours gives you product. We say product is ordinary time earnings. So ordinary time earnings is not a rate, it is a product and we ‑ ‑ ‑
HAYNE J: Rate times hours actually worked?
MS BATROUNEY: No, we say it is rate times hours prescribed in the award as ordinary hours, that being full time 38, part time 32, casual by the hour.
HAYNE J: It leads with the difficulty of rate times zero, it seems to me, for the casual because there is no prescription. But we have been down that path.
MS BATROUNEY: One thing that is clear is that it is open to either interpretation, so why is our interpretation to be preferred? We say that our interpretation is to be preferred because it does avoid the strange results that the Full Court referred to at page 107 of the appeal book. These strange results are that, as we discussed this morning, if a casual works only outside what my learned friends would say is ordinary hours, then that casual will never get any superannuation under this award. However, if that casual in a three‑month contribution period works merely half an hour of what my learned friend would call ordinary time, then the charge would be payable on that half an hour only but would discharge the employer’s obligation for that full three‑month period.
So, for example, if in a three‑month contribution period the casual always works from 7 pm till midnight every day, day in day out, but on one day in the three‑month period he or she started at 6 o’clock, then that half an hour of ordinary time would be sufficient to discharge the employer’s obligation for the entire three‑month period.
GLEESON CJ: I am not doubting that what you are saying is correct, but it assumes a better understanding of the Act than I have at the moment - that is the Administration Act. I am looking at section 19. Can you just explain by reference to section 19 how that works?
MS BATROUNEY: Section 19 imposes the charge. Unless an employer can find some way to reduce the charge, the charge is payable under section 19. The charge is calculated on total salary and wages by the charge percentage. Now, obviously if the charge percentage is zero, which is what the employer generally wants, the shortfall is zero. So what the employer in this case wanted to do is to reduce the charge percentage, which would be 6 per cent, by some figure to get to the charge percentage in that equation in section 19 to zero. How is that done? In this case one would turn to section 23, and section 23(2) is how it would be reduced. Is an employer required in an industrial award to contribute for the benefit? Yes, they are. Over to (b). Is the requisite contribution a specific percentage of the employee’s notional earning base? Yes, it is. Does the employer contribute in accordance with the award? Yes. The charge percentage is reduced by the figure A x B. Now:
“A” is the amount of the percentage figure that expresses the contribution to the fund referred to in paragraph (c) as a proportion of the total amount of the employee’s notional earnings base ‑
Notional earnings base would be ordinary time earnings. So in my example, your Honours, that half an hour ‑ let us say it was half an hour and the rate was $20, so we have $10. That $10 is the notional earnings base because that is the only ordinary time earnings on my learned friend’s argument that is included in the notional earnings base.
GLEESON CJ: Does this amount to anything more than the proposition that if the employer makes all the contributions the employer is obliged by the award to make, the employer does not suffer a shortfall or charge because there is no shortfall?
MS BATROUNEY: That is right.
GLEESON CJ: Why is that anomalous?
MS BATROUNEY: It is anomalous because by the mere artifice of rostering on a casual for half an hour in each three‑month contribution period you can discharge your entire obligation, whereas if you did not schedule them for that half an hour you would have to pay contribution on the total salary and wages.
HAYNE J: Why?
GLEESON CJ: Why?
MS BATROUNEY: Because if you go through section 23(1) we start with a charge percentage and unless it is reduced ‑ ‑ ‑
HAYNE J: They have either abided the award or they have not abided the award. If they have paid super according to the award they are home free under the Administration Act, are they not?
MS BATROUNEY: No, they are not, your Honour, they actually have to pay something. So if we can go through section 23(2) again, (a):
an employer is required . . . to contribute –
Yes. (b):
the requisite contribution is a specified percentage –
Yes. (c):
the employer contributes . . . in accordance with the award –
Now that is where your Honour is saying, well they are contributing in accordance with the award. We get to the equation:
the charge percentage for the employer . . . is reduced –
by this figure “A” and “A” refers to an amount, your Honour. So that is where Justice Hayne’s assumption falls down:
“A” is the amount of the percentage figure that expresses the contribution to the fund . . . as a proportion of the total amount of the employee’s notional earnings base:
Now, in this example there is no contribution, there is no amount, and also there is no notional earning’s base, because in this case if they are working ‑ ‑ ‑
GLEESON CJ: So that means, under this Act an employer will pay a shortfall guarantee charge even though there has been no shortfall in the amount that the employer has paid as compared with the amount that the employer is bound to pay under the award. If that be an anomaly, it is an anomaly in the legislation, is it not?
MS BATROUNEY: It is, but the problem is that it can be avoided by the mere artifice of rostering on that employee for a mere half an hour.
GLEESON CJ: That is typical of anomalies, that they can be avoided by artifice; that is what a lot of tax law is all about.
MS BATROUNEY: Yes, but that is the way this Act works, that a shortfall is imposed and unless, on some way, you can operate to reduce it ‑ ‑ ‑
GLEESON CJ: Now, what is the policy of that? What is the legislative policy of imposing a superannuation guarantee charge on employers who have fully discharged or met their award obligations? We were told, according to the second reading speech, that this legislation was to encourage employers to comply with their obligations. We were not told that it was to compel them to exceed their obligations.
MS BATROUNEY: No. Your Honour, as we said, it is an anomaly, but that is the way the Act operates in the situation where an employee, a casual employee, only works, what my learned friend says are, overtime hours. Now if our argument is accepted, your Honour, that does not arise at all, because contributions would be made in accordance with the award and section 23(2) would do its work to reduce the charge to zero. So the anomaly only arises if your Honours accept my learned friend’s argument.
McHUGH J: Could I ask you a couple of questions about the background? Do you know whether this was a consent award or was this an award that the Commission itself made and arbitrated?
MS BATROUNEY: I do not know that, your Honour. It was a rewriting of an old award that was not a consent award to start with; it was rewritten in 1993.
KIRBY J: These things are handed on from generation to generation, typically.
McHUGH J: Is there somewhere in the legislation ‑ there is something in the back of my mind about that employees were not entitled to superannuation benefits unless they worked a specified number of hours and that there was a default earnings base for them for employees who did not have rates or did not come in in some way or am I mistaken about that? I just have at the back of my mind some view that there was a some sort of default earnings base.
MS BATROUNEY: In the Act there is what is called “ordinary time earnings”. It does not apply to awards because the policy is that the Act defers the award so that if the award base is lower than “ordinary time earnings” in the Act, it is the award base that applies. However, with occupational superannuation arrangements and private arrangements, if the base upon which the employer is contributing to superannuation is less than “ordinary time earnings” in the Act, “ordinary time earnings” in the Act is the default base, as your Honour called it, upon which contributions are made. “Ordinary time earnings” in the Act are defined in section 6.
McHUGH J: Supposing you had an award in which the contribution provisions just did not deal with that employee at all in some way, by oversight or otherwise. Is there any mechanism by which the employer can be required to pay contributions under this Act? I mean, suppose in this particular case for some reason the award just did not apply to casual employees?
MS BATROUNEY: I think the answer to that, your Honour, is that there would be no notional earnings base because the notional earnings base applies employee by employee.
HAYNE J: Why would not 19 simply be engaged and there be no relief under 22(3) or 22, whatever the relief provision is? If there is no award covering, for example, casuals, 19 is engaged, is it not, and there is no excuse for the employer to be found in the, “I’ve complied with an award provisions of 23”.
MS BATROUNEY: Yes, if there is an award. I understood Justice McHugh’s question was, “If there was an award but that award did not cover that employee”.
McHUGH J: Yes.
MS BATROUNEY: Section 14 is an employee by employee definition of “notional earnings base”. It says at section 14(2):
“notional earnings base” means the earnings of the employee that, under the award . . .
constitute the . . . reference to which –
So when one applies – perhaps I will get to the same answer as Justice Hayne by a roundabout way. When one came to reduce the surcharge under section 19 one would simply find that we would fall on an earlier hurdle than we did before, so we would fall under section 23(2):
the employer is –
not -
required . . . to contribute for the benefit of an employee –
or we would fall – we would say that there was no notional earnings base in relation to that employee. So the equation would lead to a zero outcome, there would be no A in the equation, which takes us back to section 19.
The final matter that I would like to take the Court to is the decision in Kucks (1996) 66 IR 182.
HAYNE J: What is the proposition we are meant to take out of these decisions of industrial tribunals at this time, Ms Batrouney?
MS BATROUNEY: The principal construction that I would put to the Court now is that in construing an award, a construction that overcomes an injustice can be reasonably strained for, and we would say that that is the case here. Could I take the Court to page 184 where, under the heading of “Legal principles”, which is legal principles for construing an award, and what is said here by Justice Madgwick is:
It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind; they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some reading. And meanings which avoid inconvenience or injustice may reasonably be strained for.
Now, as your Honour Justice Hayne pointed out to my learned friend, it is most unusual to construe this award so that night casual employees have no entitlement to superannuation, whereas day casual employees do, and that is why we say that our construction, which needs to be strained for, as does my learned friend’s construction, there is straining required by both construction. Our construction ought to be preferred because it is a construction that avoids that injustice for night casual employees.
GLEESON CJ: If you were going to strain for a construction, why would not you strain for the one the Full Court of the Federal Court adopted?
MS BATROUNEY: We would say there is simply no warrant in the award to split a casual rate or the rates that are paid to a casual into ordinary casual rates and other casual rates, and to say that it is only the base and not the increment that is subject to superannuation guarantee.
KIRBY J: So you reject the Full Court’s approach even as a fallback position?
MS BATROUNEY: We do. If the Court pleases, they are our submissions.
GLEESON CJ: Yes, thank you, Ms Batrouney. Yes, Mr Martin.
MR MARTIN: May I take up very quickly where our learned friend left off in the case of Kucks where Justice Madgwick spoke about the way in which a clause should be interpreted. It is interesting to read at page 187 point 7 his Honour’s description of what needed to be done in that case to arrive at the conclusion sought to avoid the injustice proposed. He said:
Such a conclusion would require a weighing of the award’s overall benefits to all employees and some comparison of those benefits with industrial standards. Such a task was essayed here by neither counsel, no doubt for the excellent reason that that is the job of an award-maker rather than an award-interpreter –
which sits, in my respectful submission, with what Mr Justice O’Mara said in the old case of AWU v Abbey.
Our learned friend made something of the possibility of an employer using an artifice to reduce the amount which should be paid. Section 30 of the Administration Act deals, we would suggest, with that possibility. It provides that:
If:
(a) an employer makes an arrangement –
and arrangement is defined to include “scheme, plan, proposal, action, course of action or course of conduct” so that it does not require agreement –
If
(a) an employer makes an arrangement; and
(b)as a result of the arrangement the employer’s superannuation guarantee shortfall in a year is reduced; and
(c)in the Commissioner’s opinion the arrangement was made solely or principally for the purpose of avoiding payment
the employer is liable for the year an amount –
which the Commissioner believed –
the employer would have been liable if the arrangement had not been made.
So that artifices can be dealt with by the Commissioner if the unusual and extreme facts situation suggested was to arise.
Your Honour Justice Hayne invited an answer to the question you posed before lunch from both sides. Might I just say this, that the definition in 3.5(3)(d) needs to be read, as all these clauses need to be read, in context. If one looks at 3.5(2)(b), you will find there a requirement that:
The employer shall pay . . . at least once each calendar month ‑
the contribution, so that gives you a timeframe. You find also at 3.5(2)(c) that there is a requirement to determine whether or not an employee has exceeded “35% of the Guaranteed Minimum Wage” in order to qualify for the contribution to be paid; and in 3.5(3)(b) you need to determine how many hours have been worked in a particular period of time in order to determine eligibility. Those suggest, we submit, that “ordinary time earnings” means the actual ordinary rate of pay received for ordinary hours of work which means the rate applied to the hours worked, except where the award provides otherwise, and the award ‑ ‑ ‑
HAYNE J: So you read the words “receives for ordinary hours of work” as equivalent to “received for ordinary hours worked”?
MR MARTIN: Yes.
HAYNE J: Now, that may be permissible, it may be impermissible, I just do not know, but that is the sense in which you read those words, is it?
MR MARTIN: Yes, in order to arrive at earnings. Otherwise, you are only speaking about a rate which is a dollar per hour and it does not tell you what it is. The rest of the clause also suggests that because it says you must look at whether there have been certain loadings or allowances applied and you may not know that until the week or period is over.
HAYNE J: There is no doubt you have to go from rate to amount.
MR MARTIN: Yes.
HAYNE J: The difficulty I have is to know whether it is an explicit translation from one to the other or it is taken by the award as implicit.
MR MARTIN: We would suggest that it is taken as read, taken as implicit, particularly if one looks at the second sentence:
The term includes any over-award payment –
and that may well be a payment unrelated to hours worked. An over-award payment could be an extra $100 a week.
HAYNE J: If the translation is implicit ‑ and I think I need to put this to you for your comment ‑ if the translation is implicit, it seems to me that then a point of view about the definition of “ordinary time earnings” is that it is defining the rate only and that the translation then is simply according to the number of hours worked in this case by the casual applying to the rate that the employee would receive for working an ordinary hour during the ordinary spread.
MR MARTIN: Yes.
HAYNE J: But that seems to put you well out.
MR MARTIN: We understood your Honour to say that, but we do not obviously accept that. The requirement for an employer is to work out 3 per cent of what. Three per cent of ordinary time earnings, unless you read in there that you at the end of each month calculate how much has been received, how much for ordinary hours, how much for overtime hours, there is no way for the employer to know. We would read it as being another explicit expression that there is both an ordinary hour to be worked by a casual and an overtime hour to be worked by a casual. For example, you then go to the third sentence, “where commission is excluded”. Commission can be earned at any time in a period for any particular purpose and it is a lump sum, not based on an hourly calculation.
KIRBY J: How did the primary judge approach it? Did he approach it along the way you are urging? I did read his Honour’s brief judgment but I ‑ ‑ ‑
MR MARTIN: His Honour did, yes. Yes, it was a brief analysis of the award provisions, finding that there was explicit in the award ordinary hours for casuals and overtime hours. Overtime was excluded, and that was the end of the matter.
In answer to something your Honour the Chief Justice raised, the approach of the Full Court of the Federal Court was one not advanced by either party and it arose during argument, and it was at that time put to us by the court, and that was the result.
GLEESON CJ: It seems to have arrived here friendless.
MR MARTIN: On that note, your Honour ‑ ‑ ‑
KIRBY J: That does not necessarily mean it does not have friends.
GLEESON CJ: Thank you. We will reserve our decision in this matter and we will adjourn until 10 am tomorrow morning.
AT 3.16 PM THE MATTER WAS ADJOURNED
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