Australian Municipal, Administrative, Clerical and Services Union v John Sands Australia

[2013] FWC 9033

[2013] FWC 9033

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Australian Municipal, Administrative, Clerical and Services Union
v
John Sands Australia
(C2013/5198)

COMMISSIONER GREGORY MELBOURNE, 5 DECEMBER 2013

Alleged dispute concerning redundancy.

Introduction

[1] Ms Pamela King has been employed by John Sands Australia for almost 36 years. She is now aged 67. In July she was told her position was to be made redundant. She made application the following month for voluntary redundancy based on her understanding of the redundancy payments she was entitled to under the Agreement that covers the parties – the John Sands Clerical and Administrative Enterprise Agreement 2011–2014 1. She was told on the following day her application had been accepted, however, the parties have since been in dispute about the amount of the redundancy payment Ms King is entitled to.

[2] Ms King’s last day at work at John Sands was 21 August 2013. The following day an amount equivalent to 52 weeks pay was transferred into her bank account. However, Ms King submits she is entitled under the Enterprise Agreement to a payment equivalent to 3 weeks pay per year of service. Her total service amounts to 35.75 years and her claim accordingly equates to a payment equivalent to 105 weeks pay.

[3] The dispute centres on the terms of sub clause 29.7 “Redundancy Payments” in the Agreement. The sub clause states:

“29.7 Redundancy Payments

Employees who are nominated by the company to be redundant will receive, the following payments, provided that no employee receives less than what they would have received under the NES:

0 - 1 year service 2 weeks pay

Over 1 year's service 3 weeks pay for each completed year of service thereafter, calculated on a pro-rata basis for each completed month of service.

29.7.1 The minimum payment for an employee with over 1 year's service will be 4 weeks pay.

29.7.2 'Week's Pay' means the ordinary time rate of pay for the employee concerned excluding overtime, meal money and annual leave loading amounts, but including shift where applicable.

29.7.3 No employee will receive more in redundancy pay than they would have received had they remained in employment up to normal retirement date i.e. 65 years of age.” 2

[4] The critical part of the sub clause in the context of this dispute is 29.7.3. As indicated, Ms King claims to be entitled to 3 weeks pay for each year of service, being a total of 105 weeks. She submits sub clause 29.7.3 is unlawful and should have no application. She also submits the sub clause is not relevant as she was over the specified retirement age when retrenched. John Sands disputes this claim based on the wording of 29.7.3. It submits Ms King is only entitled to a payment based on the NES which would be a total amount equivalent to 12 weeks pay for someone made redundant with her length of service. However, it decided in her case to make a payment to her based on the scale of entitlements provided to non-award covered employees at John Sands, an entitlement capped at the equivalent of 52 weeks pay.

The Issues to be Determined

• What is the redundancy entitlement of Ms King under the Agreement?



• Is sub clause 29.7.3 unlawful? In any case does the Commission in the context of this application have the ability to declare it to be unlawful?



• Is Ms King entitled to a payment based on 3 weeks pay for each completed year of service in accordance with sub clause 29.7, or is that entitlement denied because of her age and the provisions contained in sub clause 29.7.3?



• What is the effect, if any, of her having worked past the “normal retirement date”?

The Evidence and Submissions

[5] The respective positions of the parties are relatively simple and straightforward.

[6] The Australian Services Union (ASU), on behalf of Ms King, submits in summary:

• Sub clause 29.7.3 is of no effect because it is discriminatory and therefore unlawful under both the Fair Work Act 2009 (Cth) (the Act) and the Age Discrimination Act 2004 (Cth);



• In any case the sub clause is not relevant as Ms King was over the specified retirement age when retrenched. It submits her termination came about not because she had reached a certain age, but as a result of a restructure that made her position redundant; and



• Ms King never agreed to a redundancy arrangement with John Sands that would only deliver her a payment equivalent to 52 weeks pay. It points, firstly, to the letter dated 12 August 2013 in which Ms King indicated to John Sands she would like to apply for voluntary redundancy and expressly stated, “I make such application in accordance with the terms of the John Sands EBA which would provide me with 3 weeks per year of service for each of my 35 years with the company.” 3



• It also submits the provisions in the Agreement should not be applied differently, simply because an employee ‘puts their hand up’ to be made redundant and, in any case, it is the employer who ultimately determines whether an employee is made redundant or not.

[7] In regard to the first point on which Ms King relies it is submitted that neither the National Employment Standards (NES) or the underlying Clerks – Private Sector Award 2010 4 contain provisions that support the view an employee can be provided with “lesser terms on the basis of their age.”5 The ASU refers, firstly, to section 253 of the Act, which states, in part:

“253 Terms of an enterprise agreement that are of no effect

(1) A term of an enterprise agreement has no effect to the extent that:

(a) it is not a term about a permitted matter; or

(b) it is an unlawful term”. 6

[8] It submits that the Commission should determine in this instance that sub clause 29.7.3 is an unlawful term and has no application. It finds further support for this view from the provisions in section 194 of the Act, which define the terms of an enterprise agreement considered to be unlawful. Section 194 states, in part:

“194 Meaning of unlawful term

A term of an enterprise agreement is an unlawful term if it is:

(a) a discriminatory term; or

(b) an objectionable term” 7

[9] It refers, in turn, to section 195 of the Act which contains a definition of what is a “discriminatory term.” It states:

“195 Meaning of discriminatory term

Discriminatory term

(1) A term of an enterprise agreement is a discriminatory term to the extent that it discriminates against an employee covered by the agreement because of, or for reasons including, the employee’s race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin.

Certain terms are not discriminatory terms

(2) A term of an enterprise agreement does not discriminate against an employee:

(a) if the reason for the discrimination is the inherent requirements of the particular position concerned; or

(b) merely because it discriminates, in relation to employment of the employee as a member of the staff of an institution that is conducted in accordance with the doctrines, tenets, beliefs or teachings of a particular religion or creed:

(i) in good faith; and

(ii) to avoid injury to the religious susceptibilities of adherents of that religion or creed.

(3) A term of an enterprise agreement does not discriminate against an employee merely because it provides for wages for:

(a) all junior employees, or a class of junior employees; or

(b) all employees with a disability, or a class of employees with a disability; or

(c) all employees to whom training arrangements apply, or a class of employees to whom training arrangements apply.” 8

[10] Against this background the ASU submits sub clause 29.7.3 is unlawful in that it discriminates against employees based on their age by either capping the entitlement based on their proximity to 65 years of age, or rejecting any notion that payments are required to be made to an employee over 65.

[11] It also submits the provisions in the Agreement are unlawful because they breach the Age Discrimination Act 2004. It refers, in particular, to Division 2, section 18(2)(a) of that Act which make it unlawful to discriminate against an employee on the ground of the employee’s age:

“...in the terms or conditions of employment that the employer affords the employee” 9.

[12] It makes particular reference to the decision of Vice President Lawler in Australian Catholic University Limited T/A Australian Catholic University 10(Australian Catholic University), where the Vice President held:

“[27] I think it relevant to observe that all these decisions were made in a context where compulsory retirement upon reaching a particular age was still relatively common. With the passage of the Age Discrimination Act 2004 (Cth) (AD Act) that position has now changed. There is no longer any compulsory retirement age for employees.” 11

[13] The Vice President continued to indicate in [33]:

“In short, I am not persuaded that the differential treatment to employees selected for redundancy, depending upon whether they have passed their “normal retirement date”, is reasonable in circumstances where there is no compulsory retirement age and where employees may otherwise continue in employment for an indefinite period (particularly in a context of an aging population and a policy imperative to seek to retain a greater proportion of aging employees in employment). It follows that I must proceed on the basis that clause 7.3.6.3, considered in the context of clause 7.3.5, is a discriminatory term within the meaning of s.195 and is therefore an unlawful term.” 12

[14] John Sands submits its obligations have been met in relation to Ms King and rejects the claim she is entitled to a further 56 weeks redundancy payment. In its submission she is only entitled to the benefit of the redundancy payments provided for by the NES, and in applying the provisions of the staff redundancy policy to her it has already provided an entitlement well in excess of its legal obligations. John Sands makes the following points in support of these submissions.

[15] Firstly, sub clause 29.7 of the Agreement states in part “Employees who are nominated by the company to be redundant...” 13. In its submission Ms King was given options to consider once her position had been declared redundant, and subsequently decided to volunteer for redundancy. “Consequently, as a volunteer, Ms King was not “nominated by the company” and is therefore not entitled to the benefits of clause 29.7”14 as it deals with circumstances involving compulsory redundancy.

[16] Secondly, John Sands submits the Agreement was negotiated in good faith and supported by a majority vote of employees. It was subsequently approved by a Member of the Commission in accordance with section 186(4) of the Act which requires:

“The FWC must be satisfied that the agreement does not include any unlawful terms.” 15

[17] It submits, in turn, that the EBA was approved and is in force with clause 29.7.3 “intact” 16. It is therefore entitled to rely on its provisions when determining the conditions of employment of its employees. It also submits that while section 253 of the Act intends an unlawful term has no effect it does not empower the Commission to declare a term in an existing agreement unlawful. In its submission that power is confined to the Commission’s assessment of an agreement during the approval process and, accordingly, given that the John Sands Clerical and Administrative Enterprise Agreement 2011–2014 has been approved by the Commission it is now entitled to rely upon its terms and effect.

[18] Thirdly, despite the decision of Vice President Lawler in Australian Catholic University it submits there have been several examples since that time of agreements approved by the Commission containing references to retirement age in relation to redundancy.

[19] It also notes that in the 2004 Full Bench Redundancy test case decision 17 the Full Bench considered this issue and determined that the redundancy pay limitation related to a specified retirement age should remain. John Sands made particular reference to extracts from paragraphs [163], [164] and [165] of that decision. It also notes that the Full Bench decision was handed down after the introduction of the Federal Age Discrimination Act (2004) and the Full Bench had specific regard to that legislation in arriving at its decision.

Consideration

[20] The principal issue to be considered at the outset concerns the submissions made on behalf of Ms King about the validity of sub clause 29.7.3 of the Agreement. It is submitted the sub clause is not lawful and of no effect because it is discriminatory, and I should make a finding to that effect. John Sands submits in response the Agreement has been approved by the Commission. As part of that process the relevant Member was required to be satisfied under section 186(4) of the Act that the Agreement did not contain unlawful terms. In its submission that has occurred and therefore the Agreement is operative with sub clause 29.7.3 “intact,” to use its words.

[21] This submission raises a threshold question as to whether I have the power or ability to do what is sought. The John Sands Clerical and Administrative Enterprise Agreement 2011–2014 was approved on 29 April 2011. Commissioner Cribb indicated in that decision she was satisfied each of the requirements of ss. 186, 187 and 188 had been met and the Agreement was approved and declared to be operative from 6 May 2011. That decision was not appealed.

[22] It is acknowledged that a term of an agreement has no effect to the extent it contravenes the NES (s.55) or to the extent it contains unlawful or objectionable terms (s. 253), as defined in s.194. These and other issues are matters to be considered by the Tribunal as part of its arbitral function carried out as part of its statutory obligations associated with the agreement approval process. Provision also exists for a decision at first instance to be taken on appeal.

[23] Once approved, an agreement operates and has effect based on its terms and content. This does not preclude a party subsequently taking action to test the validity or lawfulness of a term in any such agreement. However, action to ascertain and declare the rights and liabilities of parties as they presently exist involves an exercise of judicial power and, as such, is a matter for determination by a Court, rather than this Tribunal. It is a very different process, for example, from that involved in the decisions referred to by the parties in these proceedings. In Australian Catholic University and the matter of BHP Coal and Others 18 Vice President Lawler and Commissioner Wilks were respectively involved in dealing with applications for approval of agreements. They were required as part of that process, and the exercise of their arbitral functions, to be satisfied the relevant legislative requirements were met.

[24] In the context of the submissions relating to the Age Discrimination Act 2004 it is also noted that section 39(8) of that Act provides in part under the heading “Workplace Relations” that:

“(8)  This Part does not make unlawful anything done by a person in direct compliance with any of the following:

...

(b)  an instrument (an industrial instrument ) that is:

(i)  a fair work instrument (within the meaning of the Fair Work Act 2009 )” 19

[25] Section 12 of the Fair Work Act 2009, in turn, includes “an enterprise agreement” in the definition of “fair work instrument”.

[26] However, for all the reasons indicated the exercise of the Tribunal jurisdiction in dealing with applications for approval of enterprise agreements involves a different exercise of power from what is now sought by the Applicant in the present matter. As indicated, I am not satisfied the Commission now has jurisdiction to determine whether a term of an existing agreement is lawful or not. The resolution of this matter instead requires consideration of the provisions already contained in an Agreement approved by this Commission. I now turn to consider how those provisions in the Agreement should be interpreted.

[27] The parties did not make submissions about the principles to be applied to the interpretation of an industrial instrument, such as the present Agreement. However, those principles are generally well known and understood. In short, ordinary and well understood words should be given their ordinary or usual meaning. The evidence of surrounding circumstances can be admissible where the language is ambiguous or capable of more than one meaning. (Kucks v CSR Limited 20 and City of Wanneroo v Holmes21.) I have applied these principles to my consideration of the issues in dispute in the present matter.

[28] The first matter in dispute concerns the words in the opening paragraph of sub clause 29.7:

“Employees who are nominated by the company to be redundant will receive, the following payments...” 22

[29] John Sands submits Ms King was not “nominated by the company” to be made redundant, but instead volunteered to be retrenched and therefore the sub clause has no application.

[30] Ms King submits she volunteered after being asked to consider the options open to her after being told her position was to be made redundant. The letter she submitted in response on 12 August 2013 in support of her request, and contained in attachment 7 of exhibit ASU1, makes clear she volunteered on the basis she would be entitled to a redundancy payment equivalent to 3 weeks pay per year of service. However, despite having volunteered she submits this makes no difference to the entitlements due to her because, ultimately, it is the employer who determines whether an employee is made redundant or not.

[31] I am satisfied, based on the ordinary meaning of the words in sub clause 29.7, that the submissions of Ms King are to be preferred. Firstly, the words in the sub clause make no distinction between voluntary or involuntary redundancy and there is no suggestion the redundancy entitlements to be provided to employees in either case are to be different. I also accept the submission by Ms King that ultimately it is the employer that decides or “nominates” whether an employee is to be made redundant. An employee, like Ms King, may volunteer for redundancy after being told their position is to be made redundant. However, an employer may respond in a variety of ways to any such request. It may reject the request on the basis an acceptable alternative position is available, or because too many employees have volunteered. In any case I am satisfied that ultimately it is the employer who decides or “nominates” who is to be made redundant. An individual employee has no ability to impose that outcome on their employer.

[32] I also note the words in sub clause 29.6 headed “Criteria for the selection of redundant employees.” It states:

“The company shall call for volunteers for redundancy, however the company reserves the right to determine the selection of employees for redundancy. The company acknowledges that length of service will be one of the contributing factors considered for selection of redundant persons, all other things being equal.” 23

[33] The first sentence in this sub clause confirms the conclusion arrived at in the preceding paragraph. I am accordingly satisfied sub clause 29.7 intends it is the employer that “nominates” when an employee is made redundant, regardless of whether getting to that point involves a process of employees volunteering to be considered for redundancy. It is also significant that the relevant sub clauses in the Agreement make no distinction between the entitlements due in cases of either voluntary or involuntary redundancy. This again is consistent with the view there is not intended to be any such distinction.

[34] The final matter for determination turns on the words contained in sub clause 29.7.3. As indicated already I am satisfied that the Commission’s role in the present matter is not to express a view about the validity of the sub clause as a term in the agreement; it is instead to determine what application it has, if any, in the circumstances involving Ms King.

[35] The words in the sub clause can again be understood based on their ordinary and usual meaning. No employee is to receive an amount by way of a redundancy payment that is in excess of what they would have received had they remained in employment “up to normal retirement date i.e. 65 years of age.” The 8th edition of the Concise Oxford Dictionary confirms that “i.e.” is an abbreviation of the Latin expression “id est” and is generally understood to mean “that is to say” or “in other words.” 24 It is most commonly used as a means to provide more information, or to restate an idea more clearly. Clearly the intention of the parties to the Agreement is that in most cases employees will end their employment at John Sands upon reaching 65 years of age. However, as the example of Ms King indicates that “normal retirement date” was not rigorously applied across the business. The question accordingly remains, what application do those provisions have in circumstances where an employee has remained in employment for almost 3 years beyond that “normal retirement date?”

[36] Ms King submits the sub clause has no relevance to her situation as she was over the specified age when retrenched. She was not made redundant because of her age, but because of a restructure within John Sands which made her position redundant.

[37] The submissions of John Sands about the validity of the sub clause argue it is valid, given it is contained in an Agreement approved by the Commission. It also makes reference, in particular, to the 2004 Full Bench test case decision which canvassed the rationale for the existence of such provisions. It dealt with various applications to vary the standard award provisions governing termination of employment. This included an application by the ACTU to remove the provision in the standard termination, change and redundancy clause which limits severance payments to the maximum amount a retrenched employee would have earned had their employment proceeded to their retirement date. The Full Bench rejected the ACTU application for the following reasons:

“The original purpose of the provision - to ensure that employees who are retrenched in reasonable proximity to their projected retirement date should not receive more than they would have earned had they remained employed until retirement - is still apposite. The principle underpinning the existing provision is sound. The amount of money paid to a retrenched employee by way of severance pay should not cause that individual to be better off than if they had never been retrenched.” 25

[38] The Full Bench continued in the following paragraphs:

“It seems to us that despite the passage of age discrimination legislation, the concept of a normal retirement datewill continue to be relevant where a particular occupation or industry continues to have a fixed retirement date.

Where employees and employers agree in advance to a retirement date the principle underlying the current provision will also continue to be relevant. It is not uncommon for employees and employers to discuss and plan retirement dates in advance. Where they do so, the principle underlying the existing retirement age provision remains relevant - if the employee is retrenched before the agreed retirement date, severance pay should be capped so that the employee does not receive more than if the employee had worked through to the retirement date.” 26

[39] John Sands provided a further explanation about how the sub clause should be interpreted when it indicated:

“My final point is that I think it's important to look at the true effect of clause 29.7.3. It does no more than set a cap on redundancy pay; a descending cap that hits zero once an employee has reached the EBA-agreed retirement age of 65. The clause does not require any employee to retire at 65. It simply means that an employee that is made redundant at 65 is - there is no inappropriate windfall. However, the national employment standards does provide for a limited windfall there.” 27

[40] In coming to a decision in this matter I have had particular regard to the Full Bench test case decision which was handed down after the introduction of the Age Discrimination Act 2004. The Full Bench held that despite the passage of this legislation the concept of a normal retirement date was still relevant where a fixed retirement date remained in an occupation or industry, and had been agreed to in advance. In such circumstances the underlying principle of the provisions in question remained relevant. In its view employees should not receive severance payments in excess of what they would have earned had they worked through to the specified retirement date. In the present matter it is acknowledged Ms King was employed for almost 3 years beyond the normal retirement date set out and agreed to by the parties to the John Sands agreement. It is also acknowledged Ms King was not made redundant because of age, but because of a restructure within the organisation.

[41] However, I am not satisfied these circumstances act to render sub clause 29.7.3 meaningless or of no effect. The intention of the parties remains, being that no employee is to receive more in redundancy pay than they would have received had they remained in employment up to the normal retirement date. Ms King clearly remained in employment up to that normal retirement date. She continued to work at John Sands for almost 3 years beyond that point and gained the benefit of the income earned during that additional period. However, I am satisfied on balance that the fact she remained in employment beyond that point does not change the intended effect of the sub clause – that no employee will receive more in redundancy pay, apart from entitlements provided for under the NES, than they would have received had they remained in employment up to normal retirement date. The NES entitlement is, of course, provided for by the Fair Work Act 2009 and confirmed by the opening words of sub clause 29.7. Ms King, in fact, received a payment well in excess of this amount, presumably because of a decision by the company to provide some additional acknowledgement of her long service.

[42] Having come to this decision I am satisfied Ms King has no further redundancy entitlement due to her. The application is dismissed.

Appearances:

T O’Loughlin on behalf of the Applicant.

L Doherty on behalf of the Respondent.

Hearing details:

2013.

Melbourne:

1 October.

 1   AE885317

 2   Ibid at cl.29

 3   Exhibit ASU1 at attachment 7

 4   MA000002

 5   Exhibit ASU2 at para 36

 6   Fair Work Act 2009 (Cth) ats.253

 7   Ibid at s.194

 8   Ibid at s.195

 9   Age Discrimination Act 2004 (Cth) at s.18(2)(a)

 10   [2011] FWA 3693

 11   Ibid at [27]

 12   Ibid at [33]

 13   AE885317 at cl.29.7

 14   Exhibit JS1 at para 14

 15   Fair Work Act 2009 (Cth) at s.186(4)

 16   Exhibit JS1 at para 27

 17   PR032004

 18   Print S8070

 19   Age Discrimination Act 2004 (Cth) at s.39(8)(b)

 20 (1996) 66 IR 182

 21 (1989) 30 IR 362

 22   AE885317 at cl.29.7

 23   Ibid at cl.29.6

 24   The Concise Oxford Dictionary of Current English, (Clarendon Press Oxford, Eighth Edition, 1990) 586

 25   Print PR03200 at [163]

 26   Ibid at [164] and [165]

 27   Transcript at PN39

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