Australian Federation of Air Pilots v Skywest Airlines Pty Ltd
[1998] FCA 1352
•27 OCTOBER 1998
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1121 of 1997
BETWEEN:
AUSTRALIAN FEDERATION OF AIR PILOTS
ApplicantAND:
SKYWEST AIRLINES PTY LTD
(ACN 008 997 662)
RespondentJUDGE:
RYAN J
DATE OF ORDER:
27 OCTOBER 1998
WHERE MADE:
MELBOURNE
MINUTES OF ORDER
THE COURT ORDERS:
That the respondent, Skywest Airlines Pty Ltd, pay a penalty of $800 for breach or non-observance of cl 24D of the Skywest Airlines Pty Ltd Pilots Agreement 1986 as amended.
That the respondent, Skywest Airlines Pty Ltd, pay a penalty of $800 for breach or non-observance of cl 30G of the Skywest Airlines Pty Ltd Agreement 1986 as amended.
That each penalty be paid to the applicant, Australian Federation of Air Pilots.
That the respondent within 30 days of this order pay to each of the employees named in paragraph 6 of the statement of claim herein the amount to be agreed between the applicant and the respondent of any unpaid by-pass pay to which that employee is entitled in respect of the period up to 14 April 1997.
That liberty be reserved to either party to apply on not less than 72 hours notice in writing to the other party.
Note:Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1121 of 1997
BETWEEN:
AUSTRALIAN FEDERATION OF AIR PILOTS
ApplicantAND:
SKYWEST AIRLINES PTY LTD
(ACN 008 997 662)
Respondent
JUDGE:
RYAN J
DATE:
27 OCTOBER 1998
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
There is before the Court an application by the Australian Federation of Air Pilots (“the Federation”) for the imposition of a penalty pursuant to s 178 of the Workplace Relations Act 1996 (“the Act”) for breaches or non-observances by the respondent Skywest Airlines Pty Ltd (“Airlines”) of the Skywest Airlines Pty Ltd Pilots’ Agreement 1986 (“the Award”). It was claimed that Airlines had committed breaches of the Award in four distinct ways in that:
(a)in and between 1994 and 1996, in breach of Clause 30F of the Award, did fail to assign Captains C. Marks, B. Perey, P. Broad, G. Law, D. Thomas, P. Taylor, C. Fogarty and P. Gardiner to available assignments and did instead assign to those positions persons who did not have seniority over the said Captains in the “Pilots’ System Seniority List”.
(b)in and between 1994 and 1996, in breach of Clause 24D of the Award, did fail to pay to the Captains named in (a) above, the by-pass pay to which they were entitled.
(c)since 30 June, 1996, in breach of Clause 30G of the Award, did fail to re-employ Captains Marks and Taylor in vacancies which occurred and to which they were entitled in accordance with their respective seniority in the “Pilots’ System Seniority List”.
(d)since 30 June, 1996, in breach of Clause 24D of the Award, did fail to pay to Captains Marks and Taylor the by-pass pay to which they were entitled.
Before the amendments made by Commissioner Palmer on 23 May 1997 which are discussed below it appears that cl 3.7 of the Award contained a definition of “the Company” as “Skywest Airlines Pty Ltd”. As well, cl 4A of the Award, so far as is relevant, was in these terms:
4 – AREA, INCIDENCE AND DURATION OF AGREEMENT
A.(1) This Agreement shall be binding upon Skywest Airlines Pty Ltd (hereinafter referred to as the “Company”) and the Australian Federation of Air Pilots (hereinafter referred to as the “Federation”) as to all employees in the Company engaged in the occupations specified herein.
(2)This Agreement and Statutory obligations shall be binding upon any successor to, or any assignee or transmittee of the Company including a Corporation that has acquired or taken over the business of the Company where continuity of ownership or interest can be shown in any form through any level of ownership change.
Clause 24 of the Award regulated promotion and demotion of pilots employed under it by providing:
24 – PROMOTION AND DEMOTION
A.Promotion and demotion shall be in accordance with the Seniority provisions of this Agreement except where deferred as a result of not meeting the Company’s promotional criteria or for the other limitations set out in subclause D. hereof.
(i)The Company shall periodically require all pilots to state their order of preference for permanent equipment assignments on a form which includes every equipment assignment available to Skywest Airlines pilots (including East West Airlines assignments). Any pilot may alter his preference at any time by submitting a dated copy of the latest preference form.
(ii)Whenever the composition of the available equipment assignments is changed in any way the Company will call for preferences seven (7) days before awarding a new equipment assignment.
(iii)A preference will be deemed to be effective when received by the Chief Pilot.
(iv)The Federation shall have the right to scrutinise the bids submitted.
(v)A pilot awarded a new equipment assignment shall be notified immediately by the Company of the award which shall then be confirmed in writing.
C.When a pilot is promoted in grade or status over a more senior pilot, the more senior pilot shall retain the position on the Pilot’s Seniority List that he held prior to that promotion.
D.The Company may defer a pilot’s promotion for a maximum of one hundred and twenty (120) days from the commencement of training of the more junior pilot. When a pilot’s promotion in grade or status is deferred for any reason other than his not having the promotional criteria or failing to reach the required standard of flight proficiency, or not applying for a vacancy or training vacancy and he is by-passed by a less senior pilot, he shall be paid as from the date of that by-pass, the total remuneration he would have received had he not been by-passed. By-pass pay shall commence from the date of the pilot commencing to receive the rate of pay applicable to the promotional vacancy.
E.The Company and the Federation shall consult in the establishment of any promotional criteria required for specific operations.
F.On a change of category or classification of work, years of service with the Company shall determine the incremental level in the new category or classification of work.
G.On promotion to a different category or classification of work, attracting a higher remuneration, the pilot shall maintain his existing salary until proficient in the new category or classification.
H.When there is a reduction of establishment on, or phase out or withdrawal of an aircraft type and the pilot is demoted, in accordance with clause 30, to a category or classification attracting a lower remuneration, he shall be given the following minimum notice of the transfer or paid his existing salary for the period, by which the notice falls below that specified:
(a) Under 1 year of service 3 weeks
(b) Over 1 year but up to 3 years 6 weeks
(c) Over 3 years 8 weeks
I.Where the transfer to a category or classification attracting a lower salary results from the attempt and failure to demonstrate proficiency on previous equipment, the pilot shall be paid the lower salary from the date of failure to qualify.
The obligation to maintain the “pilot’s system seniority list” was imposed by cl 30 of the Award as varied which stipulated:
30 – SENIORITY
A.Subject to subclause 30D the company shall maintain the “PILOTS’ SYSTEM SENIORITY LIST” which shall specify the seniority number and name of all pilots and the date of employment on the flight staff of the Company.
B.Pilots employed prior to 29 July 1983 shall appear in the order specified in Appendix II.
C.Subject to subclause 30D the seniority number of a pilot employed after 20 July 1983 shall be decided by the date he commences employment as a pilot on the flight staff of the Company as confirmed in writing after actual commencement and shall apply where and as prescribed in the provisions of this Agreement.
D.For the purposes of maintaining the Company’s “Pilots’ System Seniority List” and for determining the seniority number of a pilot employed by the Company on 1 October 1990, who was formerly employed by Lloyd Aviation Jet Charter Pty Limited, the pilot’s date of employment as a pilot on the flight staff of the Company shall be 1 October 1990.
Provided that any such pilots shall appear in the Seniority List in accordance with the provisions of Appendix V to this Award.
E.Pilots employed on the same date shall have their relative seniority position decided by age alone, the oldest pilot being the most senior.
F.Subject to subclause 30D seniority shall govern all pilots in the case of promotions and demotions, their retention in case of reduction in force, their assignment or re-assignment due to expansion or reduction in schedules, their choice of assignments, their transfers, or change of status. Any appointment as a Supervisory Pilot may only be made to a pilot who has the seniority to rate the type or with an assignment on the type.
G.A pilot once having established a seniority date hereunder, shall not lose that date except by termination of employment as a pilot with the Company. Where a pilot is retrenched due to redundancy he shall be offered re-employment when a vacancy occurs and such re-employment shall be in accordance with the seniority date he held prior to retrenchment. It is incumbent upon the pilot to keep the Company advised of his current address.
H.The Company shall, within ten (10) days after July 1 of each year, post on bulletin boards at each pilot base and subsequently furnish each pilot with a copy of the Pilots’ System Seniority List.
I.A pilot shall be permitted a period of thirty (30) days after any posting of the Pilots’ System Seniority List each year in which to protest to the Company any omission or incorrect listing.
J.A pilot on leave or away from his home base at the time of posting of the list shall have a period of thirty (30) days from the date of his return to duty at his base during which to file such protest.
K.A vacancy for which a pilot has failed to qualify on his second check shall be filled by the next most senior eligible pilot who bids.
L.Where a pilot fails his second opportunity to qualify, the pilot shall maintain his position on the seniority list but any further opportunities to qualify shall be given only at the Company’s discretion.
The eight pilots in respect of whom breaches of the Award are alleged to have been committed were all employees of Skywest Aviation Pty Ltd (“Aviation”). The history of the relationship between Aviation and the present respondent, Airlines, has conveniently been summarised as follows by a Full Court of the Industrial Relations Court of Australia in Skywest Airlines Pty Ltd v Australian Federation of Air Pilots (1996) 69 IR 362 at 362:
Airlines commenced operations in 1982. In 1987 it carried on business by: first, providing a regular passenger transport feeder operation; secondly, conducting corporate jet operations; thirdly, conducting coast watch operations under contract; and fourthly, conducting non-regularly scheduled transport operations. On 21 August 1987 the Flight Crew Officers Industrial Tribunal (the Tribunal) certified, under ss 28 and 88V of the Conciliation and Arbitration Act 1904 (Cth) (the former Act), the Agreement which was between the Federation and Airlines. It had effect from 30 November 1986. After the certification of the Agreement, Airlines restructured its operations. Skywest Aviation Pty Ltd (Aviation) was incorporated and commenced to carry on the activities formerly undertaken by Airlines other than the regular passenger transport feeder operation. That operation continued to be carried on by Airlines. Aviation is a wholly-owned subsidiary of Airlines.
As a matter of fact Airlines maintained, until 8 September 1994, an integrated seniority list of pilots it employed together with those employed by Aviation. This list was maintained for the purposes of allocating a seniority ranking to pilots which governed promotions, demotions, retention in employment, equipment assignment, transfers and the like.
From 8 September 1994 Airlines established and operated a seniority list from which pilots employed by Aviation were excluded. As a result, a pilot, Captain Batty, an employee of Aviation, who had formerly been ranked number 71 on the integrated list was disregarded when three positions with Airlines for which he applied came to be filled in September or October 1994. One of those three positions was filled by an employee of Airlines, Captain Russell, who had been ranked at number 80, ie, below Captain Batty, on the integrated list. It was held at first instance and affirmed on appeal in Skywest Airlines Pty Ltd v Australian Federation of Air Pilots (supra) that the failure by Airlines to maintain the integrated list after 8 September 1994 and, accordingly, to offer Captain Batty one of the three new positions was a breach of cl 30F of the Award.
Each of the eight pilots had submitted a statement of preference for permanent equipment (“a bid”) in accordance with cl 24 of the Award. The dates of those bids were as follows:
C. Marks - 17 March, 1995
B. Perey - 17 March, 1995
P. Broad - 16 September, 1994
G. Law - 23 April, 1996
D. Thomas - 21 November, 1994
P. Taylor - 29 March, 1996
C. Fogarty - 6 June, 1996
P. Gardiner - 19 November, 1996
Some of those bids, being those made by Captains Broad, Law, Thomas, Fogarty and Gardiner, were, it seems, overtaken by later bids made by those pilots during 1996 or early 1997. On or about 30 June 1996, Captain Marks and Captain Taylor were retrenched by Aviation.
Before the Full Court of the Industrial Relations Court gave the judgment to which I have already referred, Aviation applied on about 16 August 1996 to the Australian Industrial Relations Commission (“the Commission”) to vary the Award:
(A)1. By amending the definition of “COMPANY” in clause 3.7 as follows:
“COMPANY” means either Skywest Airlines Pty Ltd or Skywest Aviation Pty Ltd and the obligations in this Agreement shall apply in respect of each Company separately and not jointly.
2.By deleting clause 4A(1) and inserting:
This Agreement shall be binding upon Skywest Airlines Pty Ltd and Skywest Aviation Pty Ltd and the Federation in respect of all employees in each Company engaged in the occupations specified herein save that the obligations and rights created by this Agreement shall apply in respect of each Company and its own employees and not in respect of employees of the other Company.
The grounds for that application were, essentially, that all the shares in Aviation had been acquired on 28 June 1996 by Paspaley Pearl Sales Pty Ltd and it was no longer appropriate for Airlines and Aviation to be subject to joint obligations in respect of seniority. After the change in shareholding, the name of Aviation was changed to Pearl Aviation Pty Ltd but I shall continue to refer to it as “Aviation”.
On 15 May 1997, Commissioner Palmer issued a decision in which he traced the history which I have already recounted and summarised the arguments advanced on behalf of Aviation as a series of points, including the following:
·It was never appropriate to have a joint seniority list but over the years it has become less logical. Since 28 June 1996, when the shareholding changed there is no rationale at all for having one Award which imposes obligations upon two companies who do not have any form of corporate relationship whatsoever.
·Prior to 28 June the Airline and the Aviation Company were in different markets – but now with the change of ownership they are in some respects competitors. In this case why should Pearl Aviation be a training ground for Skywest Airlines or vice versa.
·Pearl has real concerns about confidential information being disclosed to a competitor.
·The continuation of the seniority system and the need to maintain a joint list may have serious financial impact on Pearl’s business – if Pearl loses a pilot to Skywest it faces significant costs in respect of recruitment and training.
·Because of the nature of the industry Pearl would stand to lose its most experienced pilots to a competitor.
·Because it is the relationship with individual pilots (who are at the forefront with clients) that consolidates the business an increased movement of pilots can jeopardise individual contracts.
·The evidence of Mr A J Rose, Manager Special Projects for Pearl Aviation, (Exhibit GS1) covered the history of the Company, its development since 1986, the loss of the Coast Watch contract and subsequent events and the sale to Pearl Aviation.
·The evidence of Mr M T Hoar, (General Manager Pearl Aviation) covered details of the company’s cost structure, and the direct cost of training pilots. His evidence stressed client needs in terms of pilot experience. As to the financial impact of the effect of the joint list he stated:
Shareholders and directors are extremely concerned over the potential large movements of pilots into Skywest Airlines in the future. It would not be unrealistic for the Company to be closed down, given that there are 22 pilots within Pearl Aviation who have bids into Skywest.
·If Pearl lost 22 pilots retraining costs could be in the vicinity of $1 million.
·The maintenance of a joint seniority list does not suit the efficient performance of work at either Company and is clearly at odds with the objects of the Act.
·The current structure of the Award does not lead to job security but rather to insecurity.
·The variation to the Award should be made retrospective to the date of the sale viz: 29 June 1996.
The arguments advanced in opposition to the proposed variation were similarly summarised as comprehending the following points:
·The Application poses very serious implications in respect to the rights and obligations of pilots whose employment is covered under Skywest Agreement.
·There a number of matters pertaining to the pre-existing rights of pilots that have been and are before the Courts and to grant this application until all outstanding matters are resolved is “putting the cart before the horse”.
·In the period 1994-1996 there were, as a result of the loss of the Coast Watch contract, a number of pilots declared redundant – they have the right to bid for vacancies. Between 1994 and 1996 a number of Skywest Airline vacancies were filled by new recruits with Skywest declining to acknowledge bids from existing Aviation pilots. Many of these situations remain unresolved.
·Pilots now with Pearl Aviation who have exercised bid rights into Airlines but have been “individually ignored”, still have rights.
If the Commission “splits the list” the companies will argue that no further rights accrue after the date of the order.
Airlines intervened in the hearing of the application for variation and supported the contentions advanced on behalf of Aviation. In the course of his reasons for decision, the Commissioner noted an exchange which had occurred during the hearing between himself and Mr Cox who appeared for the Federation and contended that a splitting of the seniority list would disappoint expectations held by pilots already on the list who did not have current bids pending. The suggestion was made on behalf of the Federation that “a preservation of all rights” might be achieved by the incorporation in the Award of an agreed list of pilots who would continue to be entitled to bid across from Airlines to Aviation or vice versa. That suggestion, the Commissioner noted, was rejected by the companies. The Commissioner’s decision concluded:
Now having considered all that has been put by way of evidence and submissions I have decided as follows:-
1.To grant the application made by Skywest Aviation Pty Ltd.
2.To issue orders bringing this decision into effect with an operate date of 14 April 1997.
3.To recommend that the parties continue their negotiations regarding alleged “rights issues” with a view to resolving the issues that lay between them without further recourse to litigation. In this respect the Commission notes that the determination of these issues is beyond the jurisdiction of the Commission.
The reasons for my decision are:-
·In the circumstances of the sale of Skywest Aviation there must ultimately be a terminal point beyond which employees’ rights to move from Company to Company cease; and that Pearl ceases to accumulate collateral damage.
The AFAP agrees with that, and both companies argue that it is a matter of urgency.
·In my view the appropriate date upon which the respondency should alter is the last day of hearing of this matter viz: 14 April 1997. By this date the AFAP and the employees were all aware of the possibility of such a change and had ample opportunity to act as they saw fit in their own interest.
·Pearl Aviation have made application for a retrospective date of operation but I am not persuaded that I should grant an operative date that is earlier than the date of the lodgment of their Application. The time between the date of lodgment of the Application and 14 April 1997 has not seen any significant increase in claims based on pre-existing rights and in any event the principle of caveat emptor should apply. Similarly, it can be said that Skywest Airlines should have attended to these matters (which I suspect were well known to them) as part of the sales transaction.
·Pre-existing rights are not enforceable by the Commission but aggrieved pilots are able to seek redress through the Courts and indeed by all accounts that avenue is being pursued vigorously.
·To some extent the security and career paths of the pilot employees are disrupted by the sale of Aviation to Pearl but this is part of the cut and thrust of commercial life. Worse disruption could have occurred if for example the Aviation Company was simply closed down.
I have considered this along with the prospect of continuing with the existing award respondency position and the uncertainty that would mean for the two companies and all of their employees and have reached the view that the greater interest is in providing a proper basis for the future operation of the companies. In this respect I believe that this decision is in the public interest.
·The relevant extant legislation [the Workplace Relations Act 1996] in its Principle Object and in the provisions of Division 6 in my view support this decision.
Commissisoner Palmer’s order was pronounced on 23 May 1997 in these terms:
A.Pursuant to decision of the Commission on 15 May 1997 [Print PO947] the above award is varied as follows:
1.By amending the definition of “COMPANY” in clause 3.7 as follows:
“COMPANY” means either Skywest Airlines Pty Ltd or Skywest Aviation Pty Ltd and the obligations in this Agreement shall apply in respect of each Company separately and not jointly.
2.By deleting clause 4A(1) and inserting:
This Agreement shall be binding upon Skywest Airlines Pty Ltd and Skywest Aviation Pty Ltd and the Federation in respect of all employees in each Company engaged in the occupations specified herein save that the obligations and rights created by this Agreement shall apply in respect of each Company and its own employees and not in respect of employees of the other Company.
B.This order shall come into operation on and from the 14th April and remain in force for a period of two years.
Subsequently, on 14 August 1997, Airlines made a further application to vary the Award by inserting after cl 24D the following new sub-clause to come into effect on 14 April 1997:
Any obligations on Skywest Airlines Pty Ltd that were created or came into existence before 14 April 1997 pursuant to this clause to pay by-pass pay to employees or former employees of Pearl Aviation Pty Ltd shall cease on 14 April 1997 and thereafter Skywest Airlines Pty Ltd shall have no obligations to pay by-pass pay to such employees in respect of any period on or after 14 April 1997. This sub-clause shall not remove or affect any obligation on Skywest Airlines Pty Ltd to pay by-pass pay pursuant to this clause in respect of any period up to 14 April 1997.
The grounds for that further application for variation were expressed as follows:
1.The purpose of the application is to remove a potential ambiguity or uncertainty created as a consequence of the decision of the Commission made on 15 May 1997 (Print PO947) and the Order of 23 May 1997 (Print P1239) in matter C.No. 60637 of 1996.
2.The Applicant considers the Award no longer places any obligations on it to pay by-pass pay on or after 14 April 1997 to pilots employed or formerly employed by Pearl Aviation Pty. Ltd. who had made bids and been by-passed before 14 April, 1997.
3.There is an uncertainty in that some pilots apparently consider the Applicant has an ongoing obligation to pay by-pass pay which is unaffected by the Order of 23 May, 1997. If this is the effect of the decision and order then it means that the order has no real effect in respect of all the pilots that had bid before 14 April, 1997.
4.The Applicant has paid sums for by-pass pay up to February 1997 to certain by-passed pilots and now desire to complete appropriate payments to such pilots.
5.The proposed variation will:
(i)make clear the position for all parties;
(ii)give the order of 23 May, 1997 its proper effect;
(iii)is fair to all parties.
Although Airlines had pressed for an earlier hearing, its further application for variation was not listed before the Commission until after the present application had been heard by this Court. In the event, Commissioner Palmer acceded to the further application and on 11 March 1997 inserted a new cl 24DA in the terms requested by Airlines. That order was expressed to come into operation on and from 14 April 1997. An appeal to a Full Bench of the Commission has been instituted by the Federation against that order. In the course of his reasons for that further order [Print P9246] Commissioner Palmer observed at p 5:
Having considered all that has been said I am of the view that because of the position taken by the parties and their inability to settle outstanding matters that the order which issued [Print P1239] on 23 May 1997 on the draft of the applicant company may well be ambiguous. This situation cannot be allowed to continue.
This clearly is a matter of further resolving competing interests and the following factors are those which I assess affect the decision which must be made:-
·Some 22 pilots may have been viewed as having rights arising post 14 April which may be reduced if the application is granted. On the other hand it is quite conceivable that those rights may not be pursued by individuals as new and different opportunities arise.
·The situation where pilots of one company have ongoing bid rights into a competitor must eventually be brought to close.
·There is a genuine risk in my view on the evidence that the viability at least of Pearl could be threatened if a significant number of the outstanding bids remained valid as asserted by the AFAP.
·The vendor company, Skywest, has admitted it breached the award. For this it has received censure. The purchaser company, Pearl, has not breached and is an infant in this industry. As I originally observed the principle of caveat emptor perhaps should apply, but this may result in significant damage to Pearl and the loss of employment by a significant number of pilots.
·Any industrial right based on seniority is under serious challenge in the light of extant legislation.
Having considered these factors I have decided that the lesser of the two evils is to dismiss the s 111(1)(g)(1) application and to grant this application which I do reluctantly. The reason for my decision is that it is in my view and on balance in the public interest.
On behalf of Airlines it has been admitted that there was a failure to pay by-pass pay in accordance with cl 24D of the Award to each of the eight pilots with whom the application before the Court is concerned in respect of the period which ended on 14 April 1997. Indeed, the Court was informed certain payments have been made by way of making up those arrears of by-pass pay. It is accepted that an order should be made under s 178(6) of the Act that Airlines pay any by-pass pay referable to the period before 14 April 1997 which remains unpaid and it has been indicated that the parties expect to reach agreement on the quantification of those arrears.
However, it was contended on behalf of Airlines that the effect of the order of the Commission made on 23 May 1997 was to bring to an end Airlines’ obligation to maintain a common seniority list which included pilots employed by Aviation. The corollary of that submission was that from the same date pilots employed by Aviation lost their previously existing rights to “bid across” for equipment vacancies in Airlines and lost their rights to accrue by-pass pay for having been by-passed at some point before 14 April 1997.
On the other hand, Mr Borenstein of Counsel for the Federation argued that Commissioner Palmer’s order was intended to have only a prospective operation and not to deprive of efficacy any bids which had been made before 14 April 1997. In support of that contention it was argued that the interpretation advanced on behalf of Airlines would have the effect of depriving the pilots concerned of existing entitlements to bid across and to accrue by-pass pay and should only be adopted if required by clear and express language in the order of variation.
In my view, it is clear from the terms of the application before him, the arguments advanced in support of the application and his decision to vary the Award with effect from 14 April 1997 in the terms sought by Aviation, that Commissioner Palmer intended that, after that date, neither Airlines nor Aviation should be required to give effect to an integrated seniority list of the kind examined by the Full Court in Skywest Airlines Pty Ltd v Australian Federation of Air Pilots (supra). It is true that neither the terms of the variation nor the reasons for decision refer to what is to be done about bids across Airlines that were extant after 14 April 1997 or about those pilots employed by Aviation who were entitled, as at that date, to receive by-pass pay. However, it is clear from the Commissioner’s reasons that he was concerned to establish a “terminal point” after which rights to move from Aviation to Airlines, or vice versa, should cease. That was prompted, at least in part, by a perceived need to insulate Aviation, which had passed into separate ownership and was, by then, in competition with Airlines, from the potential loss of experienced pilots as a result of their exercising their rights to bid across.
Accordingly, the “terminal point” fixed on by the Commissioner was 14 April 1997 as stipulated in his order. I acknowledge the difficulty to which Mr Borenstein adverted in understanding the Commissioner’s justification of the selection of that date by saying “By this date the AFAP and the employees were all aware of the possibility of such a change and had ample opportunity to act as they saw fit in their own interest.” The difficulty is exposed by asking, rhetorically, how pilots employed by Aviation, could have acted before 14 April 1997 to preserve their own interests. I can only assume that the Commissioner intended to convey that those pilots had an opportunity to seek employment elsewhere in the knowledge that their rights to bid across for vacancies in Airlines were about to come to an end.
The construction of the order of 23 May 1997 which I favour is supported by the Commissioner’s indication in the third point of his reasons that “the principle of caveat emptor should apply” to preserve, until 14 April 1997, the exposure of Aviation to the operation of the integrated seniority list. That was apparently intended to convey that Pearl Aviation, as the purchaser from Airlines of Aviation’s business, knowingly assumed the detriments associated with the integrated seniority list and should be taken to have acquiesced in its own exposure to those detriments for a reasonable time into the future. The Commissioner also looked at the other, employees’, side of the equation when he said, in the second last point of his reasons, “To some extent the security and career paths of the pilot employees are disrupted by the sale of Aviation to Pearl but this is part of the cut and thrust of commercial life.” That observation, I consider, was an acknowledgement that, after 14 April 1997, the opportunities of pilots on the formerly integrated seniority list to pursue different career options or obtain relief from retrenchment would be curtailed by loss of the right to bid across.
The interpretation of the Award as amended is not made easier by the absence of any express indication in the order of 23 May 1997 of what is to happen after 14 April 1997 to by-pass pay which some pilots had been entitled, up to that date, to receive from Airlines. Mr Borenstein argued for the implication of a “grandfather” clause by virtue of which those pilots who had previously been receiving by-pass pay by virtue of a pre-existing bid which had been disregarded, should continue to receive the payment until effect had been given to their bids by appointment to appropriate equipment vacancies. In support of the implication of such a clause, it was argued that the contrary interpretation would involve “a retrospective deprivation of an existing entitlement” which could only be achieved by clear and express terms.
I am not persuaded that Commissioner Palmer intended to preserve an obligation on Airlines to pay any by-pass pay after 14 April 1997. The elimination of the obligation after that date was not a retrospective deprivation of existing rights. The rights of the relevant pilots to receive by-pass pay may have been “existing” but they were not vested any more than an employee entitled to a specified rate of remuneration under an Award can assert an entitlement to receive indefinitely into the future remuneration at no less than that rate. The “existing right” is to receive the Award rate only as long as the employment continues and the Award remains unchanged. I consider that this understanding of the difference between vested or “pre-existing” rights on the one hand and “existing” rights sounding in the future informed the Commissioner’s decision when he said in the antepenultimate point of his reasons:
Pre-existing rights are not enforceable by the Commission but aggrieved pilots are able to seek redress through the Courts and indeed by all accounts that avenue is being pursued vigorously.
The same understanding is echoed by the recommendation forming part of the same decision that:
...the parties continue their negotiations regarding alleged “rights issues” with a view to resolving the issues that lay between them without further recourse to litigation. In this respect the Commission notes that the determination of these issues is beyond the jurisdiction of the Commission.
In the second place, the Commissioner was expressly invited on behalf of the Federation to preserve “all rights” including, apparently, rights to by-pass pay, by incorporating in the Award an agreed list of pilots who would continue to be entitled to bid across and, presumably, until their bids were honoured, to receive by-pass pay. When the Award was varied, no such list of pilots was incorporated nor were the pilots who were to continue to receive by-pass pay identified in any other way. Finally, a construction of the Award which imposes on Airlines an obligation to continue by-pass payments in the face of a split seniority list entails that the obligation could only be avoided by honouring pre-existing bids across from Aviation pilots, who, ex hypothesi, are no longer on Airlines’ seniority list. That, in turn, will involve a fresh breach of the Award by Airlines in failing to give effect to a bid from one of its own pilots on the new “split” seniority list and the consequent creation of a new entitlement to by-pass pay in that Airlines pilot. It might also make redundant the most junior pilot on Airlines’ new “split” list. Those consequences, I consider, are to be avoided as a matter of interpretation unless the Award as amended can be seen expressly to have contemplated them.
It appears to be common ground that Airlines made no new equipment assignments between September 1996 when the Full Court handed down its decision in Skywest Airlines Pty Ltd v Australian Federation of Air Pilots and 14 April 1997 when the amendment of the Award took effect.
It was accepted on behalf of the Federation that any breach of cl 30F which may have occurred before 14 April 1997 as a result of Airlines’ failure to recognise existing bids in the assignment of new equipment or schedules was part of a course of conduct considered by Marshall J in Australian Federation of Air Pilots v Skywest Airlines Pty Ltd (1996) 70 IR 284. In that judgment which was published on 6 November 1996, his Honour gave reasons for imposing a penalty of $750 on Airlines for its breach of cl 30F in respect of Captain Batty. At the same time, a separate, further penalty, also of $750, was imposed on Airlines for its breach of cl 30A in failing to maintain an integrated seniority list. However, there is no suggestion that Airlines’ breach of cl 30G in respect of Captain Marks and Captain Taylor, who were both retrenched on 30 June 1996, should not be regarded as separate from the conduct penalised by Marshall J. Accordingly, the breach of cl 30G requires the imposition of a fresh penalty. That breach operated with obvious severity on the retrenched pilots and, in the absence of any proposal by Airlines to rectify those effects, should attract close to the maximum penalty. I therefore fix the penalty for the breach of cl 30G at $800.
Airlines’ breach of cl 24D has been mitigated somewhat by its effectively pleading guilty and paying some of the arrears of by-pass pay before the hearing of the Federation’s application for a penalty. However, the breach affected a significant number of pilots and was persisted in after the previous proceedings before the Industrial Relations Court had exposed the error in the interpretation of the Award for which Airlines had contended. That error could only have been avoided by Aviation’s application for a variation being granted with retrospective operation. It is significant in this context that Airlines apparently made no proposal to the Federation to accommodate the position of the pilots who were deprived of by-pass pay while the application for variation was pending. In these circumstances, I shall similarly fix the penalty for the breach of cl 24D at $800.
I shall order that both penalties be paid to the Federation. I shall also order that unpaid by-pass pay to which any of the eight pilots is entitled in accordance with this reasons be paid within 30 days of this order to each pilot concerned in an amount to be agreed between the Federation and Airlines. Against the possibility of a disagreement over the amount of by-pass pay, there will be liberty to apply.
I certify that this and the preceding sixteen (16) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.
Associate:
Dated: 27 October 1998
Counsel for the Applicant: Mr H Borenstein Solicitors for the Applicant: Mahony’s Counsel for the Respondent: Mr F Parry Solicitors for the Respondent: Freehill Hollingdale & Page Date of Hearing: 16 October 1997 Date of Judgment: 27 October 1998
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