Australian Workers' Union, The v Cormack Packaging Mfg Pty Ltd
[2017] FWC 468
•20 JANUARY 2017
| [2017] FWC 468 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.739 - Application to deal with a dispute
Australian Workers' Union, The
v
Cormack Packaging MFG Pty Ltd
(C2016/3931)
SENIOR DEPUTY PRESIDENT DRAKE | SYDNEY, 2O JANUARY 2017 |
Application to deal with a dispute.
[1] This decision arises from a notification of dispute by The Australian Workers’ Union (AWU) pursuant to s.739 of the Fair Work Act 2009 (the Act). The respondent to the notification is Cormack Packaging MFG Pty Ltd (Cormack).
[2] In its notification the AWU described the subject of the dispute as follows:
“2.1.1 The Respondent has operations at its Condell Park manufacturing Facility that provides specialist manufacturing packaging for varied industries such as insect & pest control, chemical & cleaning, personal care, garden & lawn care, pharmaceutical, health & wellbeing, automotive, hardware, beverages, cosmetics, food and pet care. Approximately 40 employees are engaged in the manufacturing operations.
2.1.2 The employees are engaged to work either an 8 ordinary hour roster (known as 24/5) or a 12 hour roster (known as 24/7). These rosters have been worked at least since the 1st July 2011, when the Cormack Packaging MFG Pty Ltd Certified Agreement 2011-2013 [PR514686]was approved by the Commission.
2.1.3 Under the terms of this agreement and subsequent agreements, employees working the 24/7 roster had their wages paid as an ‘all-up’ or ‘loaded’ rate. The rate incorporated payments for shift loadings and overtime or penalties. This rate became the base rate and was used to calculate the payments for the other entitlements such as annual leave, personal/carer’s leave, public holidays and overtime.
2.1.4 On the 9th May 2016, the Respondent advised its employees who work on the 24/7 roster that they would have their payments regarding annual leave and personal/carer’s leave changed from the established method using the ‘all-up rate’ to using the base rate as prescribed in the Agreement. The Respondent stated that the change would occur on the 6th June 2016.
2.1.5 The Respondent bases its decision to change the method of calculation on the wording in clause 28.12(a) and 31.1 where the words ‘Annual leave will be provided in accordance with the NES’ appear.
2.1.6 The NES, at sections 90(1) and 91 refers to payments for annual leave and personal/carer’s leave to be at the base rate of pay for employees engaged on a 38 ordinary hour week.
2.1.7 The Applicant believes that the Respondent has formed an incorrect view of the appropriate meaning of the ‘base rate of pay’ for employees engaged on the 24/7 roster and in doing so would prove to disadvantage the employees and could jeopardise the current industrial stability that exists on site.
2.1.8 The Agreement does not incorporate the terms of the Manufacturing and Associated Industries and Occupations Award 2010 [MA000010] but it is the modern award that covers the manufacturing industry and at clause 41.4(b) Payment for a period of annual leave provides the correct view of the appropriate calculation for workers engaged on the 24/7 roster:
(a) Instead of the base rate of pay as referred to in s.90(1) of the Act, an employee under this award, before going on annual leave, must be paid the wages they would have received in respect of the ordinary hours the employee would have worked had the employee not been on leave during the relevant period.
(b) Subject to clause 41.4(c), the wages to be paid must be worked out on the basis of what the employee would have been paid under this award for working ordinary hours during the period of annual leave, including allowances, loadings and penalties paid for all purposes of the award, first aid allowance and any other wages payable under the employee’s contract of employment including any overaward payment.
(c) The employee is not entitled to payments in respect of overtime, special rates or any other payment which might have been payable to the employee as a reimbursement for expenses incurred.
2.1.9 The past and current payment calculations should not be disturbed.”
[3] Clauses 28.12(a) and (b), 31 and 32 of the Cormack Packaging MFG Pty Ltd Certified Agreement 2015 - 2018 (the Agreement) 1, which was approved on 12 February 2016 and commenced operation on 19 February 2016, areset out below:
“28.12. (a) Annual leave will be provided in accordance with the NES. The entitlement, notice requirements, annual shutdown, excessive leave and cashing out provision in sub-clauses 32.2, 32.3, 32.4, 32.5 and 33 also apply to 24/7 shiftworkers.
(b) Under the NES, a 24/7 shiftworker is entitled to an additional week of annual Leave per annum. A 24/7 shiftworker for the purposes of this Agreement is a seven-day shiftworker who is regularly rostered on Sundays and public holidays. Employees engaged on the 24/7 roster are considered shiftworkers for these purposes.
(c) This additional week of annual leave equates to 38 hours. Employees working 24/7 roster will be entitled to 25 working days (totalling 190 hrs) annual leave.
(d)Leave loading payable will be at the rate of 17.5%. this will be calculated and paid based on the rate of pay in Attachment 4(ii) for the 24/7 roster (which includes 24/7 shift loading components).
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31.1 Personal leave will be provided (sic) accordance with the NES.
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32.1 Annual leave will be provided in accordance with the NES.
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32.5 (b) Nothing in this clause is intended to contravene the annual leave provisions in the NES.”
[4] Section 90 (1) of the Act is set out below:
“90 Payment for annual leave
(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay forthe employee’s ordinary hours of work in the period.
------ ’’
[5] The correspondence of 9 May 2016 whereby Cormack notified its employees of its “administrative miscalculation” (in respect of paid personal/carer’s leave, annual leave, public holidays and overtime worked in excess of the 32 hours overtime in the roster cycle included in the 24/7 rate) is set out below:
“Re: Payment of paid personal/carer’s leave, public holidays, annual leave and overtime for 24/7 shiftworkers
Background
As you are aware, a new enterprise agreement was recently approved and came into operation on 19 February 2016. It was largely a roll-over of the previous enterprise agreement with the main exception of increases to wages, allowances and a new training clause.
Rate of Pay
When it comes to the relevant rate of pay for paid personal/carer’s leave, annual leave, overtime and public holidays for 24/7 shiftworkers, the starting point is to look at the enterprise agreement and the National Employment Standards (contained within the Fair Work Act).
In essence, the requirement is that the ‘base rate of pay’ be used to calculate these entitlements.
Overpayment
We have, however, discovered that the company has been mistakenly paying 24/7 workers at the “loaded rate of pay” instead of their “base rate of pay” in the following categories:
● Paid personal/carer’s leave;
● Annual leave
● Public holidays; and
● Overtime worked (in addition to 32 hours overtime in the roster cycle included in the 24/7 rate)
That is, we have made an administrative miscalculation when applying the rates set out in the enterprise agreement in respect of these entitlements.
When it comes to annual leave loading though, this has been (and will continue to be) paid on the loaded rate as per the enterprise agreement (ie that entitlement has been paid correctly).
The base rate of pay may be known by some of you as the “24/5 rate” – that is the correct rate applicable to all workers, including 24/7 workers, when paid personal/carer’s leave (see clause 31.1), annual leave (see clause 28.12(a)) and public holidays (see clause 28.11) are taken, and when overtime in excess of the compensated amount is worked (see clause 28.10).
This is not something new under this enterprise agreement –it was the same under the previous enterprise agreement.
Moving Forward
Moving forward, whilst we obviously need to correct this aspect, we have at the same time made the decision that staff can keep any overpayments they have received in respect of these entitlements.
Accordingly, as and from the week commencing Monday 6 June 2016, we will revert to adopting the calculation of these entitlements in accordance with the terms of the enterprise agreement.
We decided on this date in an effort to assist in mitigating the effects of the change for you – this means you will continue to receive the loaded rate up until that time.
To try and assist you with understanding the ‘before’ and ‘after’ position we have set out an example below:
Operator level 3
Current Incorrect Payment (weekly pay) with an example of 6hrs overtime
24/7 Normal Hourly rate: $ 27.0417
38 hrs Time & a half $121.69
3hrs Double time $162.25
Gross Payment $1311.52
Correct payment (weekly pay) with example of 6hrs overtime
Hourly Rate $ 27.0417 (for normal 38 hrs)
Hourly rate $ 20.6668 (base rate) paid for overtime
38hrs Normal $1027.58
3hrs Time & a half $ 93.00
3hrs Double time $124.00
Gross Payment $1244.58
Questions
If you have any questions about this please contact Belinda Paul, Shaun Wallace or Neil McGillivray.”
(my emphasis)
[6] At the listing of this dispute in Sydney on 6 June 2016 Mr Beard appeared for the AWU. Mr Britt of Counsel, instructed by Ms Slater from Matthews Folbigg Lawyers, appeared with permission for Cormack, with Ms Neill and Mr McGillivray from Cormack.
[7] The parties proceeded into conciliation. Negotiations took place. When the hearing resumed Mr Britt tendered written submissions 2 on behalf of Cormack and made a further submission not contained in Cormack’s written submissions.Mr Britt summarised these further submissions as follows:
“MR BRITT: ------ The additional argument we flagged during conciliation which isn't contained in the document relates to how the rates were originally constructed for the 24/7 employees.
Those rates were designed by representatives of the Australian Industry Group who looked averaging the various shift arrangements that applied for those employees working at 24/7 fixed shift and that involved consideration of the various shift patterns that were worked over various cycles to come up with an averaging formula. I will say that it was both the desire of the respondent and its employees to have an averaging formula in that employees in particular were concerned that there was significant variance in their week to week pay, depending upon what shifts were being worked as part of the fixed shift cycle.
The mathematical exercise in respect to the shift work led to primarily a formula being developed which added slightly more than a 30 per cent shift loading to the five-day a week employees' salaries to recognise afternoon shift, night shift and weekend shift penalties and the experience came up with a formula around about 30.5 or 30.6 per cent shift loading. But there has been a little variance in that arising from rounding of cents and dollars, but primarily that is where it still sits.
The work was done in relation to using the base rate for the five-day employees, the shift loadings, to come up with the formula that provided an average salary incorporating those shift loadings. And that is the additional argument. That is the history of the matter.” 3
[8] The matter was stood over. Further written submissions were subsequently provided by the AWU 4and submissions in response by Cormack.5An opportunity for further oral submissions was provided on 21 October 2016 but the parties relied on their written submissions.
Consideration
[9] Mr Britt made submissions concerning how the rates were originally constructed for the 24/7 employees and what the intention of the parties was when settling the terms of the Agreement. Unless ambiguity in terms of the agreement is established, I can see no basis for giving consideration to any matter other than the words of the relevant clauses of the Agreement.
The National Employment Standards (NES)
[10] The AWU made the following submissions regarding the NES:
“16. The point of principle concerning the nature of the payments is the same in regard to the annual leave and the personal / carers’ leave entitlements.
17. s.55(1) of the Act states that an agreement must not exclude the NES and so provides a minimum standard that must be met.
18. The entitlements for the employees engaged on the 24/7 roster are not less than the NES.
19. s. 55(4)(b) of the Act states that an agreement may provide terms that supplement the NES.
20. The NES provisions set minimum standards for persons employed on a full-time basis of 38 ordinary hours per week (s. 63 of the Act). The employees subject to this dispute are shiftworkers engaged on fixed day and nights of 12 hours.
21. The definition for base rate of pay has to be relevant to the appropriate nature of the work.
22. Clause (b) of s.55(4)(b) of the Act states that that supplement can provide for an employee to be paid for taking a period of paid annual leave or paid personal carers’ leave at a rate that is higher than the employee’s base rate of pay.
23. s 96 (1) of the Act provides for 10 days of paid personal / carers’ leave. The employee is entitled to be paid their usual rate of pay so that there is no financial disadvantage in taking the leave. The decision by the Respondent changes this obligation.
24. When the Agreement was approved by the Commission to operate from the 19th February 2016, the terms and conditions as set out in the Agreement became the minimum standards for the employees covered by the Agreement.
25. As stated at paragraph the annual leave loading is calculated using the ‘all-up rate’, however, the Respondent wants to pay the annual leave at the lower rate. This means that employees will receive less pay when they are on annual leave than when they are working. It was not the intention of the NES to lessen an employee’s entitlement.”
[11] The NES sets minimum standards. It sets out what must be paid – the statutory minimum. In regard to all those entitlements the subject of the dispute before me (paid personal/carer’s leave, annual leave, public holidays and overtime worked in excess of the 32 hours overtime in the roster cycle included in the 24/7 rate) there is no limitation imposed by the NES on what might be agreed to be the appropriate rate of pay for the calculation of those entitlements.
[12] Those employees who work the 24/7 roster are paid the hourly rates, according to their skill levels, set out in Attachment 4 (ii) to the Agreement and that rate includes compensation for shift loadings, overtime or penalties that are payable when working on this roster.
[13] What is the base rate of pay for an employee working the 24/7 roster? I can see no reason to move away from the ordinary meaning of the words in the Act. The rate payable for the ordinary hours of work of a worker on the 24/7 roster, week in and week out, is the base rate of pay for that work. It is that base rate of pay that is the subject of the clauses within the Agreement.
[14] When the employees of Cormack were notified on 9 May 2016 of a change to be instituted from 6 June 2016 to the calculation of various entitlements, they were being notified of the proposed change from the basis on which those entitlements had been calculated since 2011.
[15] The NES does not prohibit the payment of amounts greater than the base rate of pay pursuant to an agreement or otherwise. The payment of the loaded rates of pay the subject of this dispute notification did not occur as a result of an administrative miscalculation. Those amounts were paid because that was the agreement between the parties, acknowledged by the continued payment of that rate of pay from 2011 uninterrupted from one agreement to another until the correspondence of 9 May 2016. The characterisation of these payments as having occurred as a result of an administrative miscalculation is an attempt to remake agreed terms acknowledged and confirmed by long practice.
SENIOR DEPUTY PRESIDENT
1 PR514686
2 Exhibit Cormack 1
3 Transcript PN52 – PN55
4 Exhibit AWU 1
5 Exhibit Cormack 2
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