Australian Workers' Union v Murrumbidgee Irrigation Ltd - [2011] FWA 5306

[2011] FWA 5306

FAIR WORK AUSTRALIA

DECISION

Workplace Relations Act 1996
s 709 - Application to FWA to have a dispute resolution process conducted (Div 5)

Australian Workers' Union
v
Murrumbidgee Irrigation Ltd
(DR2011/30)

DEPUTY PRESIDENT SAMS

SYDNEY, 21 SEPTEMBER 2011

Dispute concerning ‘grandfathering’ of annual leave - evaluation of positions - Mercer Job Evaluation System - remuneration benchmarking - transitional arrangements - negotiations for enterprise agreement - interpretation of annual leave clause - principles of construction - actual words used - intended purpose - balancing terms of agreement - overwhelming employee endorsement of agreement - Union’s interpretation not made out - findings made as to proper construction of clause

BACKGROUND

Legislative framework underpinning the decision

[1] On 2 February 2011, the Australian Workers’ Union, Greater New South Wales Branch (‘the Union’) filed an application under s 709 of the Workplace Relations Act (‘the WR Act’) for Fair Work Australia (FWA) to deal with a dispute in accordance with a dispute settlement procedure. The respondent to the dispute is named as the Murrimbidgee Irrigation Limited (MIL).

[2] The dispute arises under the terms of the Murrimbidgee Irrigation Limited Workplace Agreement 2008 (‘the 2008 Agreement’), a Union collective agreement made under s 340(2) of the WR Act. The Agreement was made following a vote of 109 employees on 24 July 2008 in which 107 employees voted to support the Agreement and two abstained. The 2008 Agreement was lodged with the Workplace Authority on 28 July 2008, but curiously, not approved by the Authority until 7 January 2009. The commencement date of the Agreement was therefore 14 January 2009, and it has a nominal term of five years.

[3] There is no controversy that the 2008 Agreement is a transitional instrument for the purposes of the FairWork (Transitional Provisions and Consequential Amendments) Act 2009 (‘the Transitional Act’). There is also no argument that the WR Act continues to apply in relation to a dispute arising under the 2008 Agreement and FWA has jurisdiction to deal with such a dispute where previously the Australian Industrial Relations Commission (AIRC) had such jurisdiction; subject to any limitations expressed in the terms of the Agreement itself, and those referable to s 711 of the WR Act - most notably there being no powers available to FWA to make orders in this matter (s 711(2)).

[4] For completeness, the provisions of cl 28.8 of the 2008 Agreement permits the AIRC (now FWA) to resolve this dispute by dispute resolution procedures, including arbitration. The clause is expressed as follows:

If the dispute remains unsettled the matter shall be notified to an appropriate dispute resolution provider. If parties cannot decide who should conduct dispute resolution, then either party may apply to the Australian Industrial Registry. There is then a further two week period during which the parties must try to agree on the dispute resolution provider. If they are still unable to agree, then the Australian Industrial Relations Commission (AIRC) will provide dispute resolution services. Should the matter be referred to the AIRC for arbitration then their decision will be binding on the parties involved.

[5] Conciliation was undertaken by FWA on two occasions, but ultimately the dispute remained unresolved and the parties agreed to have FWA arbitrate the matter in proceedings listed in Griffith, New South Wales. Directions were issued accordingly.

[6] Shortly stated, the dispute concerns an alleged ‘grandfathering’ arrangement of five weeks annual leave for certain employees, members of the AWU, engaged in MIL’s Irrigation Services section (numbering about 22). The ‘grandfathering’ arrangement was removed during a Mercer evaluation of the work and remuneration of all employees of MIL during 2007/8 and concurrent enterprise agreement negotiations, which subsequently led to the making of the 2008 Agreement.

History of industrial regulation

[7] For over a decade the parties in this matter have been industrially regulated through enterprise agreements (four in all) registered and/or approved by the Industrial Relations Commission of New South Wales and, more recently, by the Federal Workplace Authority. Prior to this form of industrial coverage, the employees of MIL were covered by some 22 awards or agreements registered in the New South Wales industrial system. I interpose to note that MIL was privatised in 1999, having been formerly part of the Department of Lands and Water Resources.

[8] The Murrumbidgee Irrigation Enterprise Agreement 2000 (‘2000 Agreement’) consolidated the terms and conditions of all employees into a single instrument and the existing numerous awards and agreements were either superseded or were no longer applicable. Nevertheless, the 2000 Agreement still recognised a number of disparities in terms and conditions for different categories of employees and relevantly, the annual leave entitlement, cl 15(1), was expressed as follows:

a) Employees are entitled to annual leave each year and the following entitlements are applicable within the Company:

152 hours (i.e. 4 weeks x 38 hours per week basis)

175 hours (i.e. 5 weeks x 35 hours per week basis)

228 hours (i.e. 6 weeks x 38 hours per week basis)

[9] The 2002 Agreement (the title does not change, save obviously, for the date) introduced a new subclause (b) which increased the entitlement to five weeks where employees regularly worked on Sundays and Public Holidays. The subclause read:

Employees who commence employment after the date of registration of this Agreement by the Industrial Relations Commission will be entitled to four weeks annual leave only, unless regularly rostered on Sundays and Public Holidays which will create a five week entitlement. Pro rata for part year.

[10] These provisions were carried over into the 2005 Agreement (cl 13.1) in which the entitlement was expressly identified as follows:

Employees are entitled to annual leave each year and the following entitlements are applicable within the Company:

140 hours (i.e. 4 weeks x 35 hours per week basis)

152 hours (i.e. 4 weeks x 38 hours per week basis)

175 hours (i.e. 5 weeks x 35 hours per week basis)

190 hours (i.e. 5 weeks x 38 hours per week basis)

228 hours (i.e. 6 weeks x 38 hours per week basis)

Employees who commenced employment after 1st July 2002 will be entitled to four weeks annual leave only, unless regularly rostered on Sundays and Public Holidays which will create a five week entitlement.

[11] The wording in the 2008 Agreement changed significantly. The disputed provisions are found at cl 15.1.1 and 15.1.2, which are as follows:

15.1.1

Employees are entitled to annual leave each year and the entitlement will be based on the accrual rate associated with their terms and conditions of employment with the minimum being no less than the standard 4 weeks times the weekly ordinary hours of work. Employees who work part time will be entitled to a pro rata equivalent of their entitlement.

15.1.2

Employees who work on a Shift that are rostered to work Sundays and/or Public Holidays during the irrigation season will be entitled to accrue up to 5 days additional leave each year.

(i) Additional leave will calculated (sic) on the following basis and added to the employee leave balance at the end of the irrigation season:

Number of ordinary shifts worked on Sundays and/or Public Holidays during a qualifying period of twelve months from 1st July to 30th June
Shifts	Additional Leave
4-10	1 day
11-17	2 days
18-24	3 days
25-31	4 days
32 or more	5 days

[12] It is to be relevantly observed that the references in the 2002 and 2005 Agreements to employees who commenced before and after 1 July 2002, no longer appear in the 2008 Agreement.

[13] The 2008 Agreement contains two other clauses relevant to this case. Clause 12 deals with the Remuneration Framework for Employees. Specifically, subclauses (1), (2) and (3) are pertinent and are as follows:

12.1 Position Work Value

12.1.1 All employees covered by this Agreement will be referenced to the Position Work Value Levels defined within the Remuneration Framework set out in Part F. Positions within the Framework are evaluated using the Mercer Job Evaluation methodology.

12.1.2 Each Position Work Value has a “midpoint” that has been aligned to the 25th Percentile within the Mercer remuneration data set and will be updated at the end of the financial year.

12.2 Annual Base Salary Indexation

12.2.1 The Mercer June salary indexation rate will be referenced to increase the base salary of employees in the first full pay period at the start of the financial year.

12.2.2 The parties to this Agreement recognise that if the previous year’s published Government general security water allocation for mid November is below 30% then budget constraints may necessitate an alternative method to determine the salary indexation rate for the next financial year.

12.2.3 Notwithstanding the above clauses the Company will pay a 4% increase for the 08/09 financial year and commit to an annual minimum increase of no less than 3% and no greater than 5% over the remaining period of this Agreement.

12.3 Employee Salary Transition

12.3.1 Employees will not have their current annual salary reduced as part of any salary transition plan to the Remuneration Framework.

12.3.2 Individualised transition plans effective from July 2008 will be implemented for employees to align their salary to the 25th Percentile midpoint. These plans may span a maximum five year period depending on the salary difference and/or competency development required.

[14] Clause 4 - the Scope of the Agreement - makes it abundantly clear that the Agreement is a stand alone instrument. It is expressed as follows:

4.1 This Agreement will operate as a stand alone Agreement to the exclusion of all other agreements and awards. It is a full and complete statement of the terms and conditions of employment of all employees covered by this Agreement. To avoid doubt, where ‘protected award conditions’ within the meaning of the Workplace Relations Act 1996 are inconsistent with this Agreement, they have been excluded or modified.

[15] During the course of argument, the Union also referred to three other of the Agreement’s clauses:

Sub clause 16.1.1 of the Sick Leave clause which is as follows:

16.1.1. Employees are entitled to sick leave each year and the entitlement will be based on the accrual rate associated with their terms and conditions of employment with the minimum being no less than the standard 10 days times the weekly ordinary hours of work. Employees who work part time will be entitled to a pro rata equivalent of their entitlement;

Sub clause 14.1.2 of the Hours of Work clause which is as follows:

14.1.2. This Agreement acknowledges the previous standard 35 hours per week that existed and those employees still working these standard hours are still considered permanent full time employees; and

the Redundancy clause (Cl 26) which provides higher maximum payments for employees engaged before 30 June, 2008.

[16] Annexure A - Remuneration Framework Work Level Descriptors - is to be read in conjunction with cl 12. It provides for notes which read as follows:

Note 1: Total Employment Cost (TEC) as at July 2008 includes Base Salary, Superannuation (9%) and Annual Leave Loading.

Note 2: All descriptors have been written to the highest level in the band and higher bands incorporate and build on the descriptors of lower bands.

Outline of recent negotiations

[17] MIL provided a history (which I will summarise from the documentary material) of the negotiations for the 2008 Agreement, with particular reference to its proposed adoption of the Mercer job evaluation system and remuneration benchmarking.

[18] At a meeting of the MIL Consultative Committee (‘MILCC’) on 21 February 2007, attended by the AWU Union Organiser Mr Goring, the respondent’s then Business Services Manager, Mr Pygram made a presentation of the Mercer job evaluation system and remuneration benchmarking. He explained that this required assessing the actual requirements of the job using a number of work value criteria. Mr Goring reminded management of the need to provide employees with adequate information. Mr Pygram stated that the process, moving forward, would require the completion of a number of tasks, such as:

Completion of the classification scale which would profile the monetary value within bands and describe the band level features.

Validate position monetary anomalies, examples include; difference in 35/38 hour weeks, leave entitlements and shift allowance.

Consider strategies to cater for transitional anomalies eg >$ or <$ outcomes.

Scope opportunities to bridge the gaps in positions that fall either side of the line of best fit.

This meeting was followed up by a newsletter which stated inter alia:

“The next stage in the process includes the formation of a sub-committee to complete the appropriate salary scales and banding profiles. Other issues to be resolved include validating position anomalies (35-38 hour week, shift allow, leave etc) and remuneration discrepancies.”

[19] A further MILCC meeting was held on 28 November 2007 (attended by Mr Goring) in which Mr Pygram described the process undertaken in developing the remuneration framework. He described the implications of the process as:

No-one will have their current pay cut as a result if this new framework;

Some will have reduced or nil increases going forward;

Some will have accelerated increases going forward;

Typically 5 salary steps to the 25th percentile.

[20] A MILCC meeting on the 21 February 2008 (Mr Goring was an apology) considered a remuneration framework update and a draft Performance Review and Development Policy and Procedure. It was advised that the transmission to the new structure could not be completed immediately, due to budgetary constraints. Mr Pygram also said that a new workplace agreement was in draft form. Various suggestions for inclusion in the draft were discussed. The newsletter which followed detailed a timeline for progressing the remuneration framework. The timeline reads as follows:

Timing	Action	Parties involved
Dec - Jan	Review position descriptions (PD’s) to ensure they accurately reflect the scope of responsibility and accountability of the role. Re-evaluate positions that have been updated	Exec lead/Team lead & Individual staff members/HR
Feb 08	Design individual transition strategies to align positions to the 25th percentile in consideration of: competency, hour of duty, contract period, leave provisions, budgetry [sic] impacts, vehicle and other contract arrangements.	Exec/Team lead
21 Feb 08	Update Consultative Committee on Remuneration Framework	Committee Members
Feb-March 08	Interviews with staff regarding individual transition strategies.	Exec/Team Lead and staff member
Mar - Apr 08	Formal confirmation of transition strategies with staff	Exec/Team Lead/HR

[21] The first draft of the proposed 2008 Agreement was dated 28 March 2008. It provided for an extra week of annual leave for irrigation employees who work shifts which are rostered on Sundays and/or Public Holidays, during the irrigation season. However, the annual leave clause did not reflect the ‘grandfathering’ arrangement in the previous agreements. In a meeting of the MILCC on 27 March 2008, the minutes record in respect to discussion of the various clauses of the Agreement, in particular annual leave, Mr Pygram “stated that the unnecessary details had been minimised.” He referred to ‘grandfathering’ of the sick leave status quo. A subcommittee of the MILCC met on 29 April 2008 and the minutes record no reference to any concerns regarding the omission of the ‘grandfathering’ of annual leave.

[22] The next draft of the Agreement, dated 14 May 2008, also makes no reference to the earlier ‘grandfathering’ provision in the annual leave clause. Continued reference is made to all shift workers who work on Sundays or Public Holidays during the irrigation season as being entitled to accrue 5 additional days of leave each year. The minutes of this meeting record no mention of the annual leave clause in discussion of a range of other provisions.

[23] The next draft Agreement of 25 June 2008 discloses no change to the annual leave clause from previous drafts, save for numbering (Cl 15 from Cl 13). At a MILCC meeting on 28 May 2005, Mr Goring stated that he “hoped entitlements would not be based on minimum standards.” In further discussion on the draft agreement, three clauses were considered:

Allowances;

duration of the Agreement; and

redundancy benefits.

Further feedback was sought from employees through their representatives.

[24] At the MILCC on 11 June 2008, Mr Goring “emphasised that the committee should be aware that once registration has taken place this will be a “stand alone” document and there will be no historical link to previously aligned awards or Enterprise Agreements”. Discussion of the annual leave provision records Mr Pygram saying “Tightens up entitlements for employees on their existing conditions. The same wording is stated on the sick leave provisions”.

[25] The June 2008 newsletter announced that agreement negotiations were drawing to a conclusion and further feedback was encouraged. At the 25 June 2008 MILCC meeting, Mr Goring raised concerns with the competency assessments of some of his members and indicated they would be appealing their assessments. ‘Roadshows’ for the 2008 Agreement commenced in the week of 7 July 2008 and the Agreement was approved on 24 July, 2008.

THE EVIDENCE

[26] The following is a list of witnesses who gave oral and/or written evidence in the proceedings:

Mr Harry Goring - AWU Organiser

Mr Grant Heness - Channel Attendant - Irrigation Services & AWU staff delegate

Mr Kevin Bellew - Water Bailiff - Irrigation Services

Mr Dominic Vitucci - Channel Attendant - Irrigation Services

Mr Gerrod Webb - Channel Attendant - Irrigation Services

Mr Lindsay Grieve - Channel Attendant - Irrigation Services

Mr Brad Power - Governance Coordinator

Mr Noel Weymouth - Channel Attendant - Irrigation Services

Mr Ricky Wood - Channel Attendant - Irrigation Services

Mr Brett Tucker - Managing Director

Mr Michael Pygram - Formerly Business Services Manager

Mr Stewart Wood - Human Resources Coordinator

Mr Geoffrey Beard - Operations Manager

Mr G Pigram - Customer Services Officer, Asset & Land Enquiries

Ms C Cappello - Customer Administrative Officer

Ms M Quinlivan - Executive Assistant

Union’s evidence

[27] Since 2000, Mr Goring has been the Union Organiser responsible for members working for MIL and is also a member of the MILCC. His recollections of the negotiations for the 2002 Agreement were that all annual leave entitlements over 4 weeks per year were to be ‘grandfathered,’ i.e. employees who already had the entitlement would retain it or it was bought out by MIL or those entitled to it left the workforce. He claimed that these arrangements had not been discussed during subsequent enterprise agreement negotiations and, in particular, the negotiations for the 2008 Agreement.

[28] Mr Goring described his understanding of the Mercer process. He believed that in the Irrigation Services section, where many employees had the ‘grandfathered’ arrangements, Mercer was a means of recognising the rate of pay for channel attendants who worked a summer roster, which included loadings for weekend and Public Holiday work. As their remuneration was being eroded by inclusion of the loading in their salary rate, his members were keen to see the Mercer process result in their positions being separated from rostering arrangements. Mr Goring said that the Mercer process was “conducted behind closed doors” and only discussed by the MILCC when the processes were completed. The Committee had pushed for detailed information, but outcomes were ‘insulated’ to each section and to individuals. He said the Union was never provided with details about annual leave, personal leave or allowances being affected or removed.

[29] Mr Goring said that he had been informed in mid 2010 that certain employees were receiving less money than others doing the same job because of their ‘grandfathered’ entitlements. Apparently, this anomaly had been ‘disguised’ by the three year transition period for pay increases. He believed this anomaly meant that new employees are paid a full weeks’ extra salary a year while the ‘grandfathered’ employees were given the option of giving up the extra week of leave, in order to receive the same rate of pay. He believed that this arrangement totally defeats the purpose of the ‘grandfathering’. Everyone should receive the same rate of pay and those with the ‘grandfathering’ arrangement should receive an additional week of annual leave. This also had substantial detrimental effect, as all benefits are accrued at the lower salary rate. As a result, he believed the situation was creating substantial disharmony and unrest amongst employees who feel they had been strongly disadvantaged.

[30] In cross examination, Mr Goring was asked questions about each of the MIL Agreements from 2000. Mr Goring agreed that in the 2002 Agreement, employees were entitled to 4 weeks annual leave, unless they were rostered on Sundays and Public Holidays, in which case, they received a five week entitlement. Mr Goring said that prior to the making of the 2008 Agreement, concerns had been raised by members in Irrigation Services that their rates of pay were losing relativity and they wanted confirmation of their base rate and loadings. He accepted that the respondent had always been concerned about anomalies between different rates of pay for employees undertaking the same work.

[31] As to the proposed introduction of the Mercer system, Mr Goring acknowledged that Mr Pygram had outlined to the MILCC in February 2007, the respondent’s objectives in adopting the system, one of which was position/job evaluation and how it is achieved. This was to align various jobs to equivalent companies by adopting a 25 percentile approach, i.e. 75 per cent of companies with the same position would be paying more than the respondent due to rural considerations, which equated to a median point of 50 per cent. This would be achieved by bringing employees below the line to above it, and thereby increasing salaries over time.

[32] Mr Goring agreed that Mr Pygram had mentioned “validate position monetary anomalies” but he was not aware of any discussion about what this meant. However, he agreed that this issue had been of concern to the respondent for a number of years and had been discussed previously. He accepted Mr Pygram had mentioned (15 months before the 2008 Agreement was voted on) addressing leave anomalies in this process to bring them into line. Mr Goring accepted that after each MILCC meeting a newsletter would be distributed to all staff. After the February 2007 meeting, the newsletter had referred to “other issues to be resolved included validating position anomalies, 35-38 hour week, shift allowance, leave etc and remuneration discrepancies”. He acknowledged that no employee had raised concerns with him about these matters as they had preferred to await the outcome of the Mercer process.

[33] Mr Goring agreed that on 28 November 2007, the MILCC was given a presentation of the process to be undertaken in developing a remuneration framework. He agreed the objective was to benchmark positions. Mr Goring said he had raised a number of issues about the process. He was clear that the outcome the respondent wanted was to resolve anomalies as to remuneration and leave entitlements. Mr Goring acknowledged that his members in Irrigation Services had the most to make up in the process and would benefit in that their pay moved up over a three year period. However, this was irrelevant to the present issue. Mr Goring agreed that the management undertook ‘roadshows’ to explain the process to employees. Further, Mr Goring accepted that in February 2008, MILCC members were encouraged to ask questions about the process as they played a critical role in providing feedback from the staff they represent. Mr Goring said he had not personally reported back to individual members, but conferred with his delegates to ensure that the “message had gone through”.

[34] In discussion on the next draft (February 2008), Mr Goring said that the annual leave issue was canvassed. However, the specifics of the fifth week were not reflected in the minutes. Mr Goring claimed that he had raised the issue many times with Mr Pygram.

[35] Between February and March 2008, individual ‘one on one’ meetings were held with employees regarding individual transition strategies, involving assessment of competencies and further training, if necessary. All employees were encouraged to discuss matters in their team meetings or with their representatives. Mr Goring agreed that no individuals raised specific concerns with him about their leave entitlements. This was because it was agreed to await the outcome of the Mercer process.

[36] Mr Goring accepted that the meeting on 27 April 2008 discussed each clause in the draft agreement and MILCC members were encouraged “to seek clarification, contribute ideas and suggest alternatives” to the document. The minutes record a discussion of annual leave and that Mr Pygram had explained how Public Holidays were included in the calculations. Mr Goring believed Mr Pygram was referring to the extra week’s leave. Mr Goring agreed the intent of Cl 13.1.2 in the draft and the next draft of 14 May 2008 was if an employee is rostered to work on a Sunday or a Public Holiday, the entitlement is to an extra weeks’ annual leave. He agreed this meant it applied to all employees in the Irrigation Services section. He acknowledged that he did not raise the ‘grandfathering’ issue at this meeting.

[37] At the meeting to discuss the next draft on 14 May 2008, Mr Goring accepted that the 2008 Agreement was to reflect the outcomes of the Mercer system and Cl 13.1.2 does not refer to the ‘grandfathering’ provision. Mr Goring agreed the minutes of the next meeting of 14 May 2008, referred to employees working shift work or covering weekend or Public Holidays who would accrue up to 5 additional days to their existing leave accruals i.e. 20 or 25 days.

[38] Mr Goring agreed that the 2008 Agreement fundamentally reflected the Mercer process outcomes and that the early drafts of the Agreement did not include the ‘grandfathering’ provision identified in the 2002 and 2005 Agreements. He claimed to have raised this omission with Mr Pygram and was assured that employees would not lose their fifth week of annual leave. Mr Goring accepted that he had given no evidence of any conversation with Management about assurances as to additional leave, nor were these assurances ever minuted in the MILCC meetings.

[39] Mr Goring said that in the next meeting on 28 May 2008, he had expressed strong dissatisfaction with the individual interviews concerning competency assessments. He accepted that the Mercer process was by then “a done deal”, but his members “were up in arms over the way they had been treated in the process”. They were unhappy about how they were rated and the understanding of the remuneration that went with it. He had understood that the 25th percentile midpoint was based upon an individual being fully competent. If some fell below, they would be offered training to gain the competencies and the increased rate of pay.

[40] It was Mr Goring’s further evidence that he was unaware, before the vote was taken for the 2008 Agreement, that a number of staff had been asked to elect whether they wanted to maintain their fifth week of annual leave and have a lesser salary, or forego the fifth week and receive an increase towards the benchmark. He was also unaware of whether his members had been reading the draft agreement since June, 2008. Mr Goring conceded that none of his members had ever specifically raised the omission of the ‘grandfathering’ provision in the draft agreements.

[41] Mr Goring recalled that at a meeting on 11 June 2008, he had emphasised that “the Committee should be aware that once registration had taken place this would be a stand alone document and there will be no historical link to previously aligned awards or enterprise agreements” and that the effect of Cl 4, in the July 2008 draft, reflected this. Mr Goring agreed that it had been clearly explained that no one would lose money or conditions and no employee had ultimately lost out in terms of total remuneration. Mr Goring conceded that the Mercer process allowed for any dissatisfied employee to appeal their competency assessment and this right continues to this day. Mr Goring accepted that all employees were encouraged to be part of the process of reviewing the 2008 Agreement and that they had overwhelmingly voted to support it. Mr Goring stated that, as at 11 June 2008, the only two outstanding issues were redundancy entitlements and the Agreement’s duration.

[42] Mr Goring was questioned about the concept of TEC and he accepted that through the Mercer process, a TEC was allocated to each position through benchmarking. He did not accept that if the Union’s case was successful, TEC for two equivalent positions would be different. He viewed the present position as his members being one week behind the others in terms of annual leave, and therefore not equal or uniform.

[43] Mr Goring agreed that just prior to the vote, employees received an information statement from the respondent. He said not one of his members had voted against the Agreement. The vote, taken by a show of hands at various locations which he had attended, was 107 for the Agreement and 2 abstentions. He acknowledged that Mr R Collison, the Union’s State Secretary had signed the 2008 Agreement.

[44] Mr Goring said that he first became aware of the present problem in late 2010, after 3 years of transition, and when members had become aware that other employees were one weeks’ salary ahead of them. Nevertheless, he conceded that they were not individually worse off, but were worse off compared to others.

[45] In re-examination, Mr Goring said that when Mr Pygram had stated that unnecessary details in the annual leave clause had been minimised, he had understood that the removal of the ‘grandfathering’ provision would be addressed by another means. He insisted he had always had assurances as to the fifth week being retained. Despite this, Mr Goring said that there continues to this day a ‘grandfathering’ of certain sick leave benefits. He had understood that both this benefit and the fifth week of annual leave would be ‘grandfathered’.

[46] As a channel attendant and Union delegate, Mr Grant Hennis had attended almost every MILCC meeting, involving discussion of the Mercer process. He deposed that the ‘grandfathering’ of annual leave was never discussed at meetings when he was present.

[47] Mr Kevin Bellew commenced employment with the respondent in 1999 as a labourer. He transferred to the water distribution business in 2001 as a water bailiff. Mr Bellew said that when the respondent was privatised, concern was expressed by employees about retaining their superior annual leave entitlements. As a result, anyone who was employed after 1 July, 2002 were entitled to four weeks’ annual leave, unless they were regularly rostered on Sundays and Public Holidays. In these circumstances, an entitlement of another week applied. In Mr Bellew’s case, being employed before 1 July 2002 and having also worked on Sundays and Public Holidays, he was entitled to six weeks’ annual leave. He believed that one extra week of annual leave had been ‘grandfathered’.

[48] Mr Bellew described his experience with the introduction of the Mercer process. He was told the dollar value of his position and that increases in pay would be phased in over 3 years. He said that, at no time, was he told he could keep the extra weeks’ leave, but would not be paid for it. As a result, employees in the same position as others, were paid less remuneration if they wanted to preserve their fifth week entitlement. This only became clear to him around the end of June, 2010. It meant that if the fifth week was not given up, it would be unpaid. Mr Bellew believed the fifth week had always been ‘grandfathered’ and its removal had never been discussed or negotiated with him.

[49] In cross examination, Mr Bellew agreed he had received newsletters, attended 'roadshows' and received report backs from the MILCC members on the Mercer system and the process involved. Mr Bellew said that when the respondent mentioned “validating position anomalies”, such as leave etc, he did not understand this to mean that the ‘grandfathering’ was to be lost.

[50] In negotiations for earlier agreements, Mr Bellew said that there had been concern to ensure preservation of the ‘grandfathering’ rights. He agreed that he had seen drafts of the 2008 Agreement, but he had always assumed the ‘grandfathering’ would not be excluded. He accepted that he did not raise the issue with other employees or the Union. He also accepted that in the Mercer transition, the employees in Irrigation Services were going to be particularly better off in terms of wage rates.

[51] Mr Bellew confirmed that in July 2010, he had compared his salary with a new employee and identified a difference of $1,400 per annum. He insisted that he had never been offered the option of keeping the fifth week or cashing it in.

[52] Mr Vitucci was involved with the MILCC a few years ago when the Mercer process was being discussed. He could not recall any discussion about the fifth week of annual leave. However, when the pay scales were eventually sorted out, comparisons with other employees demonstrated different rates for the same level of competencies. He believed that the Mercer process was all about competencies, not the amount of leave employees were entitled to.

[53] In cross examination, Mr Vitucci agreed that during the 2008 negotiations, the Union’s MILCC members reported back to the Irrigation Services employees what had transpired at meetings. He could not recall if individual meetings were held in order to explain how competency levels affected an individual’s rate of pay, before or after the vote was taken to approve the Agreement.

[54] Mr Vitucci recalled that in presentations given by Mr Pygram, he had mentioned that the system was designed to address various anomalies in respect to different rates and different entitlements of employees. He agreed there were differences in hours of work, shift allowances and annual leave. There had been discussion of “standardisation” of the positions, not the persons. However, Mr Vitucci could not recall discussion of the TEC concept. He believed that addressing annual leave differences would occur by ‘formalising’ the existing arrangements.

[55] Mr Vitucci agreed that after completion of the Mercer process, employees were expecting a ‘fairly hefty pay rise’. Mr Vitucci accepted that, during the negotiations he would have looked at various drafts for the 2008 Agreement. He accepted that the drafts made reference to TEC. He had not raised any question about this during the MILCC meetings. Mr Vitucci acknowledged that, although he had noticed that the wording in Cl 15 had changed, he had not raised the issue in the MILCC meetings.

[56] Four other employees - Mr L Greave, Mr G Webb, Mr R Wood and Mr N Weymouth - provided very short statements in which they all said that there had been no negotiations with them about the taking or receiving of the extra week of leave and that they had no recollection of whether the matter was ever raised. Mr T Dixon, for the respondent, did not seek to cross examine each of these witnesses on the basis that he had done so extensively with Mr Bellew about the same matters and it would simply be repeating his client’s case. Mr S Crawford, for the Union, accepted this course.

Respondent’s evidence

[57] Mr Michael Pygram was involved as the lead negotiator for the respondent in all the industrial negotiations from 1991 to his resignation in November, 2008. He is currently employed as the Business Manager at Milbrae Quarries.

[58] Mr Pygram said the introduction of the Mercer system was designed to be a fair and objective method of evaluating positions and standardising the remuneration of employees performing the same work at the same level. Having attended a two day training session in early 2007 with two other managers, Mr Wood and Ms Lawson, the respondent formed the view that the Mercer system was the most suitable remuneration system for adoption by the business.

[59] In his statement, Mr Pygram outlined the consultative process with the Unions and employees and highlighted extracts from the MILCC meetings and newsletters earlier referred to. From February to November 2007, Mr Pygram said that management took a number of steps to develop the remuneration framework, including preparing the Budget. Mr Pygram said that in late 2007, he commenced development of the draft 2008 Agreement. He outlined the process of preparing and distributing further drafts and the discussions at MILCC on its contents. Members of the MILCC were encouraged to seek feedback from members and regular newsletters were distributed. He noted that the first draft in March 2008, removed the fifth week of annual leave for all employees, except those working shifts rostered on Sundays and/or Public Holidays, during the irrigation season.

[60] During this period the respondent was also in the process of implementing the Mercer system. Mr Pygram said that the concept of TEC was integral to the Mercer system and was referenced in the various draft agreements. It defined TEC as Base Salary, Superannuation of 9 per cent and annual leave loading as at 1 July, 2008. He noted that throughout various drafts up to Draft 5, the annual leave clause did not change. Mr Pygram said that at the MILCC meeting on 11 June, 2008 to discuss Draft 5, he had said words to the effect of: “clause 15.1.1 tightens up entitlements for employees on their existing conditions and the same wording is stated in the sick leave provisions”. This was to maintain consistency in wording.

[61] Mr Pygram said that in early 2008, management decided to hold ‘one on one’ meetings with employees to discuss their individual competency assessments and the financial implications of their transition, based on their individual circumstances. To assist in this regard, Mr Pygram prepared a master spreadsheet which identified:

the name of each employee;

their role;

their competency assessment;

their current base salary;

whether they would receive an increase or decrease in salary and the amount.

The spreadsheet also identified whether an employee had a 5 week annual leave entitlement, what the amount was and whether the employee had elected to retain the extra week or cash it in. The spreadsheet included a formula to calculate the TEC based on which option an employee had chosen. Mr Pygram said that all members of the Executive had access to the Master spreadsheet and the intention was for them to use it and input feedback from the individual employees within their team.

[62] Mr Pygram said that in mid 2008, he had met with each member of the Business Services Unit to discuss their transitional arrangements. He used the spreadsheet to demonstrate the TEC of each employee. Mr Pygram said that when meeting the individuals, he explained the Mercer system outcome was based on a 38 hour week and 4 weeks’ leave. The value of the 5th week was around $700 and employees had the option of cashing it in or retaining the week. He explained the actual effect on salary in both cases. He recalled one employee with no family commitments who preferred a higher salary than an extra weeks’ annual leave.

[63] In cross examination, Mr Pygram was asked about the word ‘validate’ which was mentioned in the minutes of 21 February 2007 and the newsletter (‘validate position and monitor anomalies’) and whether it meant ‘remove’. He agreed it did not. However, he said the words must be read in context.

[64] Mr Pygram agreed that neither the AWU or employee representatives were initially involved in the development of the remuneration framework. Nevertheless, a joint working group had been set up to work through issues regarding the Mercer process. Mr Pygram agreed that the decision to offer employees the option of cashing in the fifth week of leave was made at the Executive level, but would have arose following feedback from the MILCC. It was not made in isolation.

[65] Mr Pygram further deposed that the issue of annual leave anomalies was raised at MILCC meetings and in the newsletters, but the specific issue of the fifth week was never raised. Mr Pygram said the redrafting of the annual leave clause was presented to the March 2008, MILCC. He had been through all the clauses in order to improve wording or adjust wording to suit the circumstances. Mr Pygram insisted there was no attempt to mislead anyone. He believed that if anyone had any concerns (over the clause), they would have raised them. Notwithstanding that he had said the drafting had merely removed unnecessary detail, Mr Pygram said the words used in the new annual leave clause inferred that the ‘grandfathering’ was to be removed.

[66] Mr Pygram acknowledged that some employees continue to have 15 days sick leave per annum and others have 10 days. He said the wording in the clauses arose from discussions with the MILCC.

[67] Mr Pygram accepted that the minutes and newsletters about the Mercer process do not expressly note that if an employee accepts the fifth week of annual leave they will suffer a lower rate of pay than the Mercer rate. He also agreed that in correspondence from Mercer, which mentioned ‘base salary’ and ‘employment costs’ there is no mention of annual leave entitlements. Mr Pygram explained how the fifth week of annual leave is an additional component of TEC as it is calculated on a 38 hour week and 4 weeks’ annual leave. An extra fifth week created an anomaly. Mr Pygram insisted that Cl 15.1 must be read in the context of 12-15 months of negotiations and the totality of the 2008 Agreement.

[68] Mr Pygram was asked what he meant by “tightening up” entitlements in the minutes of the MILCC of 11 June 2008. He said it meant streamlining or improving grammar, using fewer words or different words and removing unnecessary detail. Mr Pygram agreed that when the 2008 Agreement was voted on, employees were still receiving the benefits of the ‘grandfathering’ provision. However, the Mercer process was still in transition.

[69] Mr Tucker is the respondent’s Managing Director. He joined the respondent in July, 2004. Mr Tucker said the respondent’s Executive consisted of himself, Russell Webb (Operations Manager), Michael Pygram (Business Services Manager), Matt Linnegar (Corporate Affairs Manager), and Lindsay Shoemark (Chief Financial Officer).

[70] Mr Tucker said that prior to 2008, the respondent had a number of remuneration anomalies which had arisen as a result of the respondent’s transition to private ownership. Prior to this, he had received concerns, particularly from Mr Henness and Mr Vitucci, that the remuneration for employees in Irrigation Services was undervalued relative to other employees.

[71] Mr Tucker described the Mercer system in which each position is evaluated on its own merits and not on the merits of the position holder. Position scores are evaluated in the marketplace against an Australia wide database. The comparison is based upon the concept of TEC. Mr Tucker was familiar with the Mercer system and believed it could achieve consistency and equity across the business. Mr Tucker said that in late 2007 and early 2008, MILCC members acknowledged anomalies and inconsistencies in the business and expressed support for the Mercer system. Mr Tucker recalled that at meetings of the MILCC he had stated that the main objectives of the Mercer system was to remove anomalies, such as differences in leave, pay rates and vehicle treatment.

[72] Mr Tucker said that in one Executive meeting at the time, Mr Pygram had identified a range of options to effect the remuneration transition towards a TEC at the 25th percentile for a fully competent individual. Options considered were changing the hours of work, rate of pay and annual leave arrangements. One option was for employees with a fifth week of annual leave to either retain it or cash it in. The Executive had agreed that these options were to be topics of negotiation with individual staff members.

[73] Mr Tucker described the meeting of the MILCC in early 2008 which had discussed the new workplace agreement. Mr Pygram had led these discussions and members of the MILCC were encouraged to consult their members, obtain feedback and report back. Mr Tucker said that at no time in the meetings he had attended, did anyone raise concerns about Cl 15 or how it had been redrafted.

[74] Mr Tucker outlined the series of compulsory ‘roadshows’ held in Griffith and Leeton in which he discussed the implementation of the Mercer system and the negotiation for the new agreement. In addition, individual transitional strategies were conducted and employees were regularly kept informed through further newsletters and updates posted on the intranet site. Mr Tucker was not involved in the individual meetings, but he was made aware of concerns Mr Goring had in respect to how one manager had conducted such meetings. Mr Tucker had agreed with Mr Goring and corrected the problem by rescheduling the meetings again with a different manager.

[75] At subsequent Executive meetings, each Executive member presented a list of the effect on each individual employee, including whether an employee had opted to cash in the extra fifth week of leave or retain it. Mr Pygram had also prepared a spreadsheet setting out a list of all employees, their TEC and the transition time for the employee to reach the 25th percentile, which included consideration of the fifth week of annual leave.

[76] Mr Tucker said that in the lead up to the vote for the new agreement, a draft was circulated and posted on the intranet. He could not recall any member of the MILCC raising any concerns over the change in wording of the annual leave clause.

[77] In cross examination, Mr Tucker was taken to Cl 26 of the Agreement which provides for a minimum redundancy payment of 52 weeks pay for employees who were engaged before 30 June 2008 and 26 weeks maximum for employees engaged after 30 June, 2008. Mr Tucker denied this provision creates an anomaly for employees engaged before and after 30 June 2008. This was because redundancy is not a factor in the TEC and may never be paid. Nevertheless, he accepted the clause created two different entitlements for employees. He was also referred to some employees on a 35 hour week and others on 38 hours and noted that employees can still opt to retain the fifth week of annual leave. These differences are all accommodated within the concept of TEC.

[78] Mr Tucker deposed that he and Mr Pygram had made the decision, in consultation with the MILCC, to commence discussions with individuals. The Committee knew when they were to commence and had expressed concern when some went “off the rails”. Mr Tucker did not consider it appropriate for the MILCC to be privy to private discussion about an individual’s pay rates. He noted that the MILCC had made a decision to achieve standardisation in terms and conditions of employment consistent with the TEC.

[79] Mr Tucker rejected a proposition that employees with a fifth week of annual leave who receive a lower salary, are costing less than those on the higher salary. He claimed it is the same TEC to the business. This is demonstrated by the fact that a fifth week can be accrued and paid out on resignation or termination of employment and therefore comes at a cost to the business. While Mr Tucker agreed that the option of cashing in was not mentioned in any meetings, it was part of the broad principles in addressing anomalies though the Mercer system which the MILCC were aware of, and had agreed to.

[80] Mr Tucker said that the Executive had considered various options on a range of matters which were to be put to individuals. Management had been conscious of not reducing salaries as a result of the process. He said that when the Irrigation Services positions were first looked at, the positions were redrafted to reflect higher responsibilities and functions. It was these redrafted positions which Mercer later assessed.

[81] Mr Tucker believed that everyone knew that the annual leave clause had been changed. Nevertheless, he accepted that there was no reference in any of the minutes as to the effect of the change. However, there were references to ‘sorting out anomalies’. He believed that allowing a fifth week of annual leave, did not address the anomalies and was inconsistent with TEC. Mr Tucker said none of the proposed changes took effect before the signing off on the 2008 Agreement and the respondent took the step of individually informing employees, so they would not be misled and in ‘the interests of open disclosure’.

[82] Mr Tucker agreed that the respondent had brought no evidence from employees in Irrigation Services, demonstrating that any of them had been given the option of cashing in or keeping their fifth week of annual leave.

[83] Mr Tucker agreed that TEC does not have to be the same for each employee, but it is determined for each position and the elements that form the basis of TEC are consistent across all employees. Mr Tucker believed that the changes to the annual leave arrangements were negotiated through the agreement process and with the MILCC’s cooperation. Opportunities had existed for any issues to be raised and considered within the context of the agreed Mercer system. He said that the overall intent was to streamline the document and to agree on matters to be included in the 2008 Agreement.

[84] In re-examination, Mr Tucker gave further details of the information which was provided to employees in order to achieve uniformity in relation to TEC. He emphasised that the MILCC had been well briefed on the concepts involved with the Mercer process, through power point presentations and various reference documents. He also elaborated on the purpose of individual meetings with employees. It included giving flexibility to staff if they preferred extra leave, rather than a higher rate of pay.

[85] Mr Wood has been employed by the respondent since 1986. It was Mr Wood’s experience that, over recent years, he has had numerous discussions with members of management, union organisers and employees about the employees’ divergent employment conditions. Depending on the date an employee was employed, the unit they joined or the particular Award they were covered by, employees who were doing the same job and with the same experience, were often paid different salaries and entitlements. In giving examples of the differences, Mr Wood said that there was a need to standardise employment positions to create uniformity and equality across the business. Mr Wood suggested that as a result of the ongoing drought and the difficulty of recruitment in rural areas, the respondent had embarked on an ‘employer of choice’ strategy to attract and retain staff. Part of the strategy was to develop a remuneration framework which was more competitive in the marketplace. This had resulted in the introduction of the Mercer process.

[86] Mr Wood outlined the membership of the MILCC and his involvement in it. The Committee had met twice in 2007 and once a month in 2008. Mr Wood’s evidence as to the discussion at the MILCC and the issuance of newsletters is consistent with that of Mr Tucker and Mr Pygram. Mr Wood particularly recalled that the removal of the ‘grandfathering’ provision was not mentioned at any of the MILCC meetings.

[87] Mr Wood was part of the Executive team which had decided to consult with individuals and put the option of retaining the fifth week of leave or cashing it in so as the TEC would be the same for all employees. Mr Wood also referred to the master spreadsheet prepared by Mr Pygram and to the individual meetings he had had with him to discuss his own options as a recipient of the fifth week entitlement. Mr Wood said he had willingly agreed to cash in his extra annual leave week, as he deemed it not to be to his advantage.

[88] Mr Wood was responsible for receiving and updating the results of individual employee meetings and recording the option chosen on the master spreadsheet. In one column was the value of the fifth week, another column set out the employees’ option. There are then columns dealing with the value and response. If the employee elected to cash in, a (Y) was recorded, if not an (N) was recorded. There is a TEC for each employee’s position drawn from the data in the spreadsheet.

[89] Mr Wood referred to the voting process for the 2008 Agreement and the letter in October 2008 to all employees which identified their remuneration and transitional arrangements. He agreed that a year later, a certain number of the employees’ conditions had changed due to the transition to the Mercer system.

[90] Mr Wood denied the words used in a conversation about the issue with Mr Bellew as set out in his evidence. After complaining about a difference in his salary, he believed he told Mr Bellew that his annualised salary took into account the extra week of annual leave and that he should discuss the process with his representatives, including Mr Goring, who was aware of the process. He could not recall saying to Mr Bellew “if you give me a signed letter saying that you are prepared to give up the fifth week, then we will pay you for that week.”

[91] Mr Wood added that the PSA and APESMA Union delegates, who represented members who received a fifth week entitlement, had not raised any complaint or concern regarding the treatment of annual leave.

[92] In cross examination, Mr Wood agreed that the 2008 Agreement provided for differing entitlements as to sick leave, hours of work and redundancy. However, he said these were all consistent within the framework of TEC. Mr Wood agreed that it was said that TEC only includes base salary, superannuation of 9 per cent and annual leave loading. However, annual leave is implied as salary, because it is paid as if one is working. As the system is based on a 38 hour week and 4 weeks’ leave, any fifth week must be factored into the TEC.

[93] Mr Wood said issues of ‘grandfathering’ were discussed on an individual basis, taking into account a person’s individual circumstances. Mr Wood believed that the parties were put on notice, through the drafting of the 2008 Agreement, that clauses about ‘grandfathering’ had been removed. He could not, however, recall any exact words to that effect. Nevertheless, given that he was actually affected by the change, he knew what it meant. Mr Wood believed that all affected employees had been given the option and had made an election as the spreadsheet had recorded their choices.

[94] Mr Wood was referred to a letter he wrote to Mr Goring on 24 November 2010. He believed it explained that employees still had the option of five weeks leave being retained. Mr Wood agreed that in the letter sent to employees, it does not expressly state that they would be receiving a lesser rate if they keep their fifth week of leave. In re-examination, Mr Wood said this letter was to confirm the individual transitional arrangements and where an employee’s salary had moved to.

[95] Mr Beard gave evidence that in the 'roadshow' he had attended in December 2007, Mr Tucker had specifically informed staff that there would be adjustments to salary in moving from 5 weeks to 4 weeks annual leave and an option for staff to move from a 35 hour week to a 38 hour week. Staff were assured that nobody would lose any money as a result of the adoption of the Mercer system.

[96] Mr Beard had conducted individual meetings with his direct reports in the Assets Unit. He had been sent a spreadsheet which set out the details for each individual employee. He then prepared a one page remuneration breakdown form for each employee and together with Mr Russell Webb (then Operations Manager) held individual meetings with 12 employees around the 27-28 May, 2008. Where employees had a 5 week annual leave entitlement, he had told them they had the option of retaining the fifth week or cashing it in for remuneration of equal value. Mr Beard said that on or about 15 September 2008, he had undertaken the same exercise for another 32 employees in the Works and Construction Unit. Mr Beard said he had received his own letter in October 2008 setting out his individual transitional arrangements.

[97] In further examination in chief, Mr Beard referred to the 'roadshow' in December 2007 and said he was quite upset that some persons in Irrigation Services, who he believed did not deserve it, were going to receive an increase of about $5,000 per annum. He had been so taken aback that he had expressed his concerns to the Managing Director after the meeting. Mr Beard reiterated that he recalled reference to the fifth week of annual leave as being part of the content of the presentation.

[98] In cross examination, Mr Beard accepted that he had not met any of the Union’s witnesses in this case individually during the Mercer process. Mr Beard said that to his understanding, a fifth week of annual leave would not affect TEC, as ultimately an employee is paid for 52 weeks a year.

[99] Mr Brad Power said he had three or four informal 15-30 minute ‘one on one’ meetings with Mr Pygram over the transition to the 2008 Agreement. Mr Pygram had explained how the Mercer system applied to him and how personal information could be imputted if he elected to take four instead of five weeks’ annual leave. In his case, Mr Power said it was not a significant difference and he accepted the higher rate of pay. In further examination in chief, Mr Power said he had asked in May 2008 for further information from Mr Pygram on calculations relating to transitioning from 35 to 38 hours a week and from five to four weeks’ annual leave.

[100] In cross examination, Mr Power said he did not work in Irrigation Services and therefore he did not know what had occurred in meetings involving those employees.

[101] Three other employees provided statements, but were not required for cross examination. In summary, Mr Pigram said as a result of benchmarking his job, his salary had been assessed as $1,500 above what it should be. As an off set, he was offered a reduction in five to four weeks’ annual leave. He declined to do so because of school age children commitments. Ms Cappello decided to keep her extra week of annual leave as a result of individual meetings with Mr Pygram. Ms Quinlivan also elected to keep her fifth week of annual leave as she was working part-time and had young children.

SUBMISSIONS

For the Union

[102] In an outline of the Union’s submissions, Mr Crawford detailed the history of the making of the 2002, 2005 and 2008 Agreements in respect to the annual leave provisions. He noted that the 2008 Agreement provided for the evaluation of position work value levels using the Mercer system and agreed the intent of the process was to determine appropriate rates of pay for specific employees so that employees performing similar duties would eventually be paid the same, after a transitional period.

[103] Mr Crawford put that when the transition concluded in July, 2010 it became apparent that a number of AWU members were receiving a lower rate of pay than those with the same competency levels and responsibilities. This had arisen because the 2008 Agreement contains a commitment to TEC being the same for all employees in a particular position. The respondent had argued that the preserved entitlement to an additional week of annual leave meant employees would suffer a reduction in pay commensurate with the value of the week’s leave. Employees had been given the option of either retaining the fifth week with a lower rate of pay or cashing it in and losing the fifth week preserved entitlement. The Union believed this outcome was contrary to the intent of the 2008 Agreement to preserve a superior entitlement for employees who commenced employment before 2002. Mr Crawford said it had always been acknowledged and understood that these pre-2002 employees would always receive a more beneficial annual leave entitlement.

[104] Mr Crawford submitted that the evidence advanced by the Union had established that there was never any discussion, let alone agreement, that the preserved entitlement would be altered by the Mercer process. That process was directed to addressing pay discrepancies, and ought not be applied to altering the substantive terms and conditions of employment for employees. He said the respondent could not unilaterally rescind the preserved entitlement. Mr Crawford noted that even if there had been agreement about TEC, it did not contemplate annual leave.

[105] In oral submissions, Mr Crawford said that this case involved an interpretation of Cl 15.1.1 of the Agreement and that the wording of this provision clearly contemplates a continuation of the ‘grandfathered’ annual leave entitlements by the use of the words “with the minimum being no less than the standard four weekly ordinary hours of work”. These words should be interpreted to mean “any entitlements under any previous agreements”. Mr Crawford said there was no ambiguity, but even if there was, the documentation referred to throughout this case, supported the Union’s position that there was no intent or agreement to remove the ‘grandfathered’ entitlements. Indeed, Mr Pygram had said that his redrafted words were only to ensure “unnecessary detail had been minimised”. Mr Crawford said that there was no reference, in any of the MILCC meeting minutes, to the actual removal of the preserved entitlements.

[106] Mr Crawford noted that although Mr Goring gave evidence that assurances had been given by Mr Pygram, no other evidence supports these assurances being given. Even so, the minutes of meetings do not reveal any intention of management to put on the table the removal of the fifth week entitlement. Mr Crawford observed that sick leave entitlements were different for some employees, but retained under the 2008 Agreement, without any reference to their removal. Mr Crawford also noted that the ‘grandfathered’ provision had not actually been removed, because it continues to be available as an option. This demonstrated an inconsistency in the respondent’s position.

[107] Mr Crawford said that the concept of TEC was loosely defined in Annexure A to the Agreement and what the respondent asked the Tribunal to do, was to read into that definition an agreement that employees’ salaries are to be the same. Such a conclusion cannot be read into the definition. Mr Crawford added that, in any event, a fifth week of leave is no additional cost to the respondent because it is still in the 52 week span - the time simply not worked. Mr Beard had acknowledged as much.

[108] Mr Crawford conceded that the employees and Union representatives probably should have ‘looked a bit closer’ at the wording in the clause and raised questions at the time, but they were operating on the respondent’s assurance that the changes “only removed unnecessary details”. Mr Crawford submitted that there was no option given to any of his members and, even if it had, it would still be an unfair outcome. Just because the employees’ rates went up does not give the respondent the right to absorb other costs “by knocking off other entitlements”. Mr Crawford noted that the decision to offer the employee the options was made at the Executive level and not by the MILCC. This was improper, considering that annual leave is a fundamental employee entitlement.

[109] Mr Crawford made submissions on the authorities cited by the respondent in support of its case. In respect to the decision in Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67, where the Full Court described a particular interpretation as ‘an absurd result’, this description could not possibly be used to describe this case. Mr Crawford also made submissions in respect to Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (No 3) [2006] FCA 1023, as to the ‘objective’ intent of the words in the Agreement: see also Toll Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; Tenix Defence Pty Limited [PR917548] (9 May 2002); S J Higgins Pty Ltd and others v Construction, Forestry, Mining and Energy Union re S J Higgins Pty Ltd and MBAV/CFMEU Building and Construction Industry Collective Bargaining Agreement 1999 [PR903843] [2001] AIRC 420; J.J. Richards & Sons Pty Ltd and another v Transport Workers’ Union of Australia [2011] FWAFB 3377.

[110] Mr Crawford concluded by emphasising a lower base rate of pay obviously affects a number of other employee entitlements, including superannuation, sick leave and annual leave. This is not a fair outcome. The Union asks FWA to find that the ‘grandfathering’ arrangement should be honoured.

For the respondent

[111] In his outline of contentions, Mr Dixon of Counsel, put that the Union’s case rested on a question of construction or, alternatively, upon a mistake, in that the ‘grandfathering’ clause had been removed without the Union’s knowledge or contrary to its intent. Mr Dixon said in respect to construction, that the statutory context in which the Agreement was made, is relevant, (i.e. the WR Act). In this regard, s 337 and 340(2) of the WR Act required the respondent to ensure that all eligible employees had ready access to the Agreement and were provided information in relation to the Agreement at least 7 days before the vote for approval. He noted that these sections do not require employees to have read or understood the Agreement, although it was obviously incumbent on them to do so. Once it was signed or approved it was binding: see Communications Electrical Electronic Energy Information Postal Plumbing and Allied Services Union of Australia v Blue Star Pacific Pty Ltd [2009] FCA 750 (‘the Blue Star case’) & Toll Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52. Mr Dixon said that no issue had been taken by the Union as to compliance with the WR Act. In any event, Unions were involved in the consultative process and were responsible for the dissemination of information to their members.

[112] Mr Dixon traced the history of the ‘grandfathering’ provision and the purpose and intent of the Mercer process, which included the setting of TECs for each employee. While conceding that Annexure A to the 2008 Agreement, does not expressly state that the TEC includes annual leave, Mr Dixon said it is obvious that it must be included. This resulted in the removal of the ‘grandfathering’ provision in order to ensure that the TEC is standardised across all employees. As a consequence, there is not, in reality, any question of construction as the words no longer appear in the clause.

[113] Mr Dixon submitted that for the purposes of interpretation, the task for FWA is to find the objective intent of the parties. This requires consideration of the words used in the document, the surrounding circumstances which were known to the parties and the underlying industrial purpose and objects of the transaction (the Agreement): see Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67. Mr Dixon said that the industrial purpose of the Agreement was to standardise terms and conditions by removing anomalies through the adoption of the Mercer system which determined appropriate rates for specific positions, so that employees performing similar tasks would eventually have the same TEC. To this end, it was made clear that the process of alignment and change involved consideration of the existing leave conditions.

[114] Mr Dixon said that the ‘grandfathering’ reference was removed in the very early drafts of the 2008 Agreement and options had been put to some staff prior to the Agreement’s approval. There could be no suggestion of any misrepresentation, particularly as numerous drafts were circulated to MILCC members and staff. The new clause was put forward after lengthy consultation involving MILCC meetings, ‘roadshows’, newsletters, individual meetings and a final vote to approve the Agreement. Mr Dixon noted the overwhelming vote of approval for the 2008 Agreement.

[115] In respect to the Union’s alternative position, that the clause was removed in error and should be rectified, Mr Dixon submitted that this finding required clear and convincing proof:

(a) that the Agreement does not correctly record the common intention of the parties; and

(b) what the common intention was.

He said that there was an inherent unlikelihood that the common intention to achieve a standardisation of terms and conditions of employment had been misrecorded.

[116] Mr Dixon said the proper construction of the Agreement is one that recognises:

(i) the ‘grandfathering’ of annual leave does not form part of the 2008 Agreement; and

(ii) employees who had the benefit of such ‘grandfathering’, retain that right, subject to their base salary being adjusted to take account of the fifth week, in order to align them with employees on the same TEC.

[117] In oral submissions, Mr Dixon added that the Union’s case was advanced on two fundamental misconceptions. Firstly, contextually, Cl 4.1 makes it plain that the 2008 Agreement is a stand alone agreement to the exclusion of all other agreements and awards. Once that is appreciated, it is difficult to see how the Agreement can be read as importing into it, the terms of earlier agreements. Going to the words themselves in Cl 15.1, Mr Dixon said it is impossible to see how the words of the earlier agreements can be read into the clause. The words created a new single set of rights and have been completely rewritten and had been communicated to the Unions and the employees from an early stage. Mr Dixon said that even so, to the extent that the negotiations mattered, it was clear at all times, that the intent was to change how things had operated in the past and to deal with anomalies in the workplace. Understanding this raises the obvious question - why wasn’t the change ever queried? It was known to all parties what the Mercer system set out to achieve and it was reflected in the Agreement.

[118] The second misconception was related to the concept of TEC. Mr Dixon said that Cl 12 not only speaks of TEC, but also of work value. For each band there is a TEC assigned together with work value. Mr Crawford had only focussed on TEC and failed to address the fact that work value is changed by reducing the working year by a further week.

[119] Mr Dixon outlined the long lead time between the point the Mercer system was proposed in February 2007 to when the 2008 Agreement was finally approved. The evidence all points to an extensive and comprehensive period of consultation, feedback and dissemination of information. Mr Dixon rejected criticism of the respondent for deciding to commence individual ‘one on one’ meetings. These were all done with the knowledge of the MILCC and, indeed, at one point, criticised by Mr Goring.

[120] Mr Dixon submitted that the intent of the employees in approving the Agreement was clear. In the face of significant wage increases, they had weighed up the benefits against any quid pro quo as to the loss of other conditions and decided overwhelmingly to approve the Agreement. Mr Dixon put that the evidence of Mr Goring as to assurances given by Mr Pygram can be ignored. This claim was only raised for the first time during the proceedings and Mr Pygram never had the matter put to him in cross examination.

[121] Mr Dixon then dealt with the witness evidence. He said Mr Goring’s evidence can be summed up in two points - he accepted the Mercer system was based on a 38 hour week and a 4 week annual leave benchmark and he accepted the 2008 Agreement was a stand alone agreement. All the other Union MILCC members could not recall discussion as to TEC. Mr Bellew’s evidence was important in that he had been vigilant to protect his rights under earlier Agreements, but on this occasion he had not asked any questions about the ‘grandfathering’ provision, even though he had accessed the drafts. Either this means, if the intent was really to continue the entitlement, it would have been picked up or the employees knew precisely what they were voting for and weighed up the benefits and losses.

[122] Mr Dixon dealt with the authorities in the two Blue Star cases which involved misleading information as to the draft of an agreement put to employees. Mr Dixon described the decision of Reeves J, at first instance, as a ‘low hurdle’ in respect to the onus on employees to read an agreement and the Full Bench, on appeal, actually set the ‘hurdle’ even lower. The circumstances in this case demonstrate an employer who went much further than the Act required to provide information to employees. Mr Dixon accepted that in respect to individual meetings, some occurred before the Agreement’s approval and some afterward. But the timing was not essential as the process of assessing competencies is ongoing. There could be absolutely no suggestion of the respondent trying to hide anything.

In reply

[123] Mr Crawford said the Union was not suggesting individual meetings did not occur, but rather that the ‘grandfathering’ was not discussed. All of the witnesses’ evidence was clear on that point. Mr Crawford criticised the respondent’s case for raising work value as an issue when the whole case was based on TEC. Mr Crawford compared the ‘grandfathering’ clause in the 2005 Agreement and observed that it too was not entirely clear. Similarly, the clause in the 2008 Agreement speaks in generic terms.

CONSIDERATION

[124] The obvious starting point of my determination of this matter (and accepted by the parties as my first task in this case) is to consider the principles which are to be applied by FWA in the construction of industrial instruments; obviously in this case, the 2008 Agreement and, more particularly, Cl 15.1 of the Agreement. Before doing so, however, I wish to make it abundantly plain, that I consider that the respondent has complied with all of its relevant legal obligations under ss 337 and 340 of the WR Act. Indeed, on one view - to which I am more than inclined - the respondent went well beyond its legal and industrial obligations in consulting with its employees and Unions - seeking their feedback, involving them in constructive negotiations and disseminating information over an extended period prior to the vote taken by the employees to approve the 2008 Agreement. Based on all the evidence, I can only conclude that the vote to approve the Agreement was made after the employees had been properly informed of its contents and understood its implications.

[125] Turning back then to the construction of Cl 15.1 of the Agreement, two recent authorities of the Full Bench of the Federal Court and the majority decision of a Full Bench of FWA, have helpfully distilled the principles which guide me in this matter. Firstly, in Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67, the Full Bench of the Federal Court said at paras 14-18:

“14. Support for the position that the industrial context and the intention or purpose of the makers of an industrial instrument should be paramount notwithstanding the strict wording of the document is found in the judgments of members of the High Court in Amcor Limited v Construction, Forestry, Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241.

15. In Amcor, Gleeson CJ and Mc Hugh J stressed at paragraph [2] that:

(t)he resolution of the issue turns upon the language of the particular agreement, understood in the light of its industrial context and purpose, and the nature of the particular reorganisation.

See also at paragraph [13], where their Honours referred to:

...the industrial purpose of the agreement, and the commercial and legislative context in which it applies.

16. Further, the purposive approach to the construction of industrial instruments was persuasively illustrated by Kirby J in Amcor at paragraph [96] where his Honour said:

The nature of the document, the manner of its expression, the context in which it operated and the industrial purpose it served combine to suggest that the construction to be given to cl 55.1.1 should not be a strict one but one that contributes to a sensible industrial outcome such as should be attributed to the parties who negotiated and executed the Agreement. Approaching the interpretation of the clause in that way accords with the proper way, adopted by this Court, of interpreting industrial instruments and especially certified agreements. I agree with the following passage in the reasons of Madgwick J in Kucks v CSR Ltd, where his Honour observed:

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 other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.
(Original emphasis.)

See also per Gummow, Hayne and Heydon JJ at [30].

17. The approach of the High Court in Amcor is consistent with the modern approach to interpretation of commercial agreements where context and surrounding circumstances will be taken into account “even if the words at issue are not ambiguous, or susceptible of more than one meaning”; see Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1 at paragraph [46], per Weinberg J and see also at paragraph [251] where Lander J said:

It is now clear and settled law that the meaning of commercial contracts and documents is to be determined objectively. To determine the objective intention of the parties regard must be had, of course, to the words in the document themselves, but regard should also be had to all of the surrounding circumstances which were known to the contracting parties at the time the document was created including the underlying purpose and object of the commercial transaction: Pacific Carriers per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [22].

18. What is true of commercial contracts and their construction is also true of the construction of industrial agreements where regard must be had to the industrial context and the purpose of the provisions in question. In that regard, see also Short v FW Hercus Pty Ltd [1993] FCA 51; (1993) 40 FCR 511, especially at 518 to 520 per Burchett J, and City of Wanneroo v Holmes [1989] FCA 369; (1989) 30 IR 362 at 378 per French J. The issue currently in contest between the parties may fairly be resolved by asking the following question: given the purpose of Public Holiday provisions and the purpose of creating additional Public Holidays, could it be reasonably intended by industrial parties to an industrial instrument that a person would be entitled to the benefit of a Public Holiday for Anzac Day and on the very next day the provision of another Public Holiday for Anzac Day? The answer is obvious and must be no.”

In Australian and International Pilots Association v Qantas Airways Limited and Jetconnect Limited [2011] FWAFB 3706 (6 September 2011), Boulton J, Hampton C (Drake SDP not dissenting as to construction principles)said at para 73 - 78:

“[73] The general principles governing the construction of contracts have been applied to the construction of industrial instruments. 22 In Codelfa Construction Pty Ltd v State Rail Authority of N.S.W23 the High Court considered the widely accepted principles for resolving ambiguity in contracts. In that case Mason J (with whom Stephen and Wilson JJ agreed) stated the rule as follows:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.” 24

[74] In the present case, the starting point is essentially a question of construction: to determine whether the clause has a plain meaning or contains an ambiguity. This involves a consideration of the intent - objectively ascertained - of the award-maker. 25 It is a consideration of what is the proper meaning of the clause as distinct from the making of a judgment as a matter of arbitral discretion as to what the clause should provide.

[75] As Madgwick J said in Kucks v CSR Limited 26:

...

But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.” 27

[76] The industrial purpose of an award provision is a relevant consideration in construing its meaning. However as was observed by Jessup J in Chief Commissioner of Police v Kerley 28:

“Care must ... be taken not to perceive a particular industrial purpose in a combination of contemporary circumstances that differs from those obtaining when the words were written. I also consider that, generally, the words used by the award maker should be the starting point for the ascertainment of his or her purpose.” 29

[77] In our view, the words and intent of clause 5 of the Award are clear. The words of the clause make it clear that the employer bound by the Award is Qantas, “the Company”, and that it is binding upon Qantas in respect of pilots “employed by the Company in operations known as Qantas short haul operations.” There is nothing in the wording of the clause indicating that the award-maker intended the Award to cover subsidiary companies of Qantas or that the parties to the Award saw the Award or its predecessors as applying to subsidiaries or to an operation such as that of Jetconnect. It is not sufficient for a party simply to assert that an award provision has a particular meaning or application and then to rely upon such assertion as establishing that there is uncertainty or ambiguity in the provision. The meaning of the provision and the existence of an ambiguity must be objectively ascertained.

[78] It is also relevant in the construction exercise to consider the history of the Award and the full context of the award clause. 30 This includes the context of the clause in the Award and the context within which the Award was made including the relevant statutory provisions. Such a consideration confirms the conclusion reached regarding the meaning of the words of the clause. It has not been demonstrated that there is anything in the other provisions of the Award which indicates that the Award was intended to bind Jetconnect or to apply to pilots employed by Jetconnect. Further the legislative environment in which the 1996 award was made required that there be a finding of an industrial dispute between the relevant employees and one or more identified employer or an employer association. The award made in settlement of that dispute would only be binding upon those parties, although an application could be made to the Australian Industrial Relations Commission by a registered organisation of employees to “rope in” a new employer. Such a roping-in application could have been made up to 2006, when the WR Amendment Act took effect. The only employer party to the dispute which lead to the making of the Award and which continued to be bound by the Award was Qantas.”

[126] Two propositions, although expressed in the negative, emerge from the above cases which, to my mind, are apposite to the facts and circumstances of this case:

the Tribunal should not give a meaning to a clause in an agreement as a matter of arbitral discretion as to what the clause should, or ought to provide; and

a moving party cannot simply assert that a clause has a particular meaning or application and then rely on that assertion as establishing any uncertainty or ambiguity.

Meaning of the actual words used

[127] I turn now to consider the actual words used in Cl 15.1 of the 2008 Agreement. In my opinion, there can be absolutely no doubt as to the meaning of the words used. That being so, it is unnecessary to rely upon any extrinsic material to resolve any doubt, uncertainty or ambiguity about the meaning of the words. Plainly, the wording of clause 15.1 in the 2008 Agreement is very different to the words in the corresponding clauses in the 2002 and 2005 Agreements. The reference to ‘grandfathering’ of a fifth week of annual leave is no longer to be found in the new clause. It is not open for the Union to now seek to import into the clause, words which expressly or impliedly conflict with the ordinary and usual English meaning of the actual words used.

[128] Moreover, the evidence of the respondent’s witnesses left little doubt that the management had intended to redraft the clause in such a way as to remove the ‘grandfathering’ entitlement. That said, I do not think it particularly relevant that the Union’s focus was on what Mr Pygram is alleged to have said, about merely “removing unnecessary detail” and not expressly spelling out the effect of the redrafted clause. On any plain, objective reading, the words or more correctly, the disappearance of the words, speak for themselves. It was patently obvious (or should have been) what effect the dramatic change had from the wording in the earlier agreements.

[129] There was no evidence of any subterfuge, deception, concealment, surprise or misunderstanding as to what the actual words meant. Indeed, the changed wording was ‘on the table’ for at least four months. In any event, there was acknowledgement by the Union’s witnesses, notably Mr Vitucci, that recalled Mr Pygram as mentioning that the Mercer system was designed to address various anomalies in respect to different rates and different entitlements. As one of the obvious anomalies, the fifth week must be taken to have been included as being a matter to be addressed. When it was, no one queried it.

[130] Notwithstanding Mr Crawford’s valiant submissions, I do not accept the proposition that the words in the clause “with the minimum being no less than the standard 4 weekly times the ordinary hours of work”, convey an intention that the fifth week of annual leave was to be retained. In my view, these words must be read in the context of the clause as a whole and, more particularly, in conjunction with the the following subclause (15.1.2) dealing with additional leave for working shift work during the irrigation season. Even so, considering the disappearance of the words giving effect to the ‘grandfathering’ arrangement, it is difficult to fathom how the words relied on by Mr Crawford relate to an earlier entitlement.

[131] Mr Crawford also submitted that the words “the entitlement will be based on the accrual associated with their terms and conditions of employment” (my emphasis) should be interpreted to mean entitlements which had arisen under the terms of previous agreements; namely, the fifth week of annual leave. This submission cannot be accepted for two reasons. Firstly, there is no savings provision in the 2008 Agreement which might have captured and preserved entitlements arising from superceded agreements. Secondly, the operation of Cl 12 expressly established the 2008 Agreement as a stand alone instrument, thereby preventing any obligations or entitlements under earlier agreements from continuing to operate. Indeed, I note it was Mr Goring who stressed during one of the MILCC meetings (11 June 2008) that the Agreement was a “stand alone document and there will be no historical link to previously aligned awards or enterprise agreements”. Given the operation of Cl 12, I do not see how it is possible to reconcile it with obligations arising from the terms and conditions of superceded awards or agreements.

[132] Before leaving Mr Goring’s evidence for the moment, I need to mention his claim that Mr Pygram had given him assurances that the ‘grandfathering’ of the fifth week of annual leave would not be altered with the introduction of the Mercer system. Putting aside the fact that this claim was only raised for the first time in Mr Goring’s oral evidence; that no other witness gave such evidence; and that Mr Pygram was not cross examined on the matter, Mr Crawford appropriately, in my view, did not press Mr Goring’s claims. In any event, the respondent’s deliberate and transparent abandonment of the words preserving the entitlement, lead me to find it highly unlikely that anyone in management would have given any such assurance. In making this observation, I do not wish to appear to be critical of Mr Goring who I found to be an open and credible witness. Perhaps he simply confused assurances about no employee being financially worse off under the Mercer evaluation process, which, in fact, is the case.

What was the industrial purpose of the clause?

[133] Turning now to the industrial purpose of Cl 15.1 of the 2008 Agreement, I would make the following observations.

[134] In my assessment of the evidence, I do not think there is any doubt that the redrafted clause emerged as but one component of a desire by the parties to standardise the employment arrangements of the respondent. There had been years of disquiet about undervaluing of jobs, historic inequities in outcomes and different rates and conditions for employees performing similar work. The respondent also wished to standardise employment conditions in order to enhance the recruitment and retention of skilled employees in its rural location by providing for fair market rates. These are unashamedly laudable and worthwhile objectives. To achieve these goals it was decided, (initially by management), to embark on a process of evaluating work based on the position, rather than the person or historical nuances. The process was accepted and embraced by the Unions, no doubt with some initial reservations. This was to be achieved through the adoption of the Mercer evaluation process of benchmarking positions. Inherently, and conjunctively, this meant the removal of anomalies between employees with the same competencies and skills, enhancing the competencies of employees through training and thereby increasing the rates of pay for all employees during and at the conclusion of a transitional period which extended over many months. An essential ingredient of the process, particularly as far as the respondent was concerned, was the concept of TEC, which has featured so prominently in the current proceedings. There is no dispute that the Union’s employees, subject to this application, benefited substantially from the final outcome of the process. That said, I agree with Mr Crawford that the higher wage outcomes are an irrelevant consideration in this case.

[135] The Mercer process was to be conducted, for obvious practical reasons, as near as practicable to negotiations for the new industrial agreement. In my view, each of the components of the industrial intent of the parties must be viewed as a whole - one purpose cannot be isolated or divorced from the whole. The manifestation of this purpose - to put it in common parlance - was a package of arrangements in a stand alone agreement. It was also predicated on the proposition that no employee would suffer a reduction in financial entitlements than previously enjoyed and, for the vast majority, it meant a substantial improvement. The fact that the 2008 Agreement was overwhelmingly accepted is ready testimony of this conclusion. Thus, when viewed as a package of arrangements, Cl 15.1 cannot be isolated as some aberration, mistake or unintended consequence which now needs addressing, particularly given the industrial environment from which it emerged and the fact that it was agreed upon over 3 years ago. This brings me to some of the other evidence adduced in this case.

[136] At the outset, I do not consider that much weight can be put on the undisputed documentary evidence and the recollections of many of the witnesses, that there was no express reference to the effect of the deletion of the ‘grandfathering’ provision in any letter, email, minutes, newsletter or recalled conversation. Given the range and complexity of issues under discussion at the time, this is perhaps unsurprising. However, if there had been any issue as to the removal of the ‘grandfathering’ provision, it beggars belief, that after so many eyes had been cast over the clear and unequivocal words, and over such a long time, that not one of the employees, delegates or Union officials even raised a query as to its effect. In this respect, I note that Mr Bellew had been particularly vigilant on earlier occasions to ensure his special entitlements were retained. It is curious that the Union’s evidence stressed that the issue was never raised or discussed with them, as this only corroborates, if it was an issue, why it was never raised by the Union or its members.

[137] I am further puzzled by the evidence that some employees were being asked to make an election as to opting to retain the fifth week or cashing it in. It is difficult to imagine that the ‘word wasn’t getting around’ when options were being offered to some employees. In other words, the loss of a week’s pay must have been a real and ‘live’ issue before the 2008 Agreement was approved. In my opinion, the only inferences which can be drawn from the evidence, is that the issue was either not raised because it was not considered sufficiently important enough to figure prominently, or at all, during the negotiations, or that the employees weighed up the ‘pros and cons’ of the 2008 Agreement’s terms and, ultimately overwhelmingly endorsed it as a package. Unfortunately, either way, the Union cannot raise objections, over two and a half years after the Agreement was made, to seek to have the words mean something they do not, and contend for a purpose for which they were never intended. To do so would be contrary to both principle and law.

[138] That said, I accept that there was no evidence that any of the employee witnesses in Irrigation Services were given the option of cashing in their fifth week of leave or retaining it with a commensurate salary reduction. However, the uncontested evidence of at least some of the administration employees - Ms Cappello, Ms Quinlivan and Mr Pigram - was that they had been given the option and had decided to keep the fifth week of leave. I also observe that in individual calculations prepared by the supervisors, and discussed with the employees, a notation was made on the document as to the option preferred by each employee. Putting this aside, I am unable to ascertain whether all of the other of the affected employees were given the options.

[139] Understandably, the Union’s case placed much reliance on the fact that despite the intent of the parties to remove anomalies, there still existed differences between employees in respect to redundancy, hours of work and sick leave - so why not annual leave? Three things can be said about this submission. Firstly, it ignores the meaning of the actual words of Cl 15.1. Secondly, at least in respect to sick leave and redundancy, these are not considered to be part of remuneration, as they are contingent liabilities which may, or may not ever be used. That being so, it is obvious why they would not factor into the concept of TEC. Thirdly, and most importantly, there was never any wavering in the respondent’s insistence and focus on ensuring that the concept of TEC was an essential ingredient to the Mercer process. Sick leave and redundancy do not form part of the notion of TEC, just as Public Holidays, maternity leave or long service leave are not factored in. I also note that there was evidence that employees who had historically been engaged on a 35 hour week had also been given the option of moving to 38 hours a week. Although no detail was provided as to how this would be structured, it plainly demonstrates that another of the anomalies between employees was sought to be addressed. On one view, the differences in the hours of work, (38 or 35), does not support the Union’s case at all. Rather the relevant clause (14.1.2) expressly acknowledges the previous 35 hour week standard as applying under the 2008 Agreement to certain employees. It seems to me that if the intention was to make clear that ‘grandfathering’ of annual leave was preserved in the 2008 Agreement, then words similar to those in 14.1.2 could have been easily adopted in the annual leave clause.

[140] Before leaving this point, I should state that there is no basis to the Union’s submission, that as annual leave is not mentioned in the definition, it follows that it is not an employment cost. The definition of TEC is base salary, 9 per cent superannuation and annual leave loading. As Mr Dixon correctly noted, employees are paid for 52 weeks a year, inclusive of paid annual leave not worked. This is an essential foundation of the TEC concept. When viewed in this way, annual leave must be a component of the base salary and therefore is a component of the TEC.

[141] In a somewhat novel line of questioning, Mr Crawford endeavoured to have the respondent’s witnesses agree with him that the fifth week of annual leave is not a cost to the respondent at all, because the employee is paid not to be at work and therefore it cannot be a part of TEC. He observed that Mr Beard had agreed with him. However, I cannot agree and believe that Mr Beard misunderstood what he was being asked. The fifth week must be a cost to the respondent. I illustrate the correctness of this proposition in the following way: a fifth week of annual leave, not taken, would be accrued and paid out on termination of employment, in all circumstances. In addition, the respondent incurs additional costs if an absent employee’s position is required to be filled by someone else. ‘

SUMMARY

[142] For all of the aforementioned reasons, I conclude that the proper construction of Cl 15.1.1 of the Murrumbidgee Irrigation Limited Workplace Agreement 2008, does not include the ‘grandfathering’ arrangement of annual leave which had applied under the earlier 2002 and 2005 Agreements. As a result, it is accepted that employees of Murrumbidgee Irrigation Limited, who were previously entitled to the ‘grandfathering’ arrangement, may elect to retain the arrangement and be paid a rate less than those who elect to cash in the additional week of annual leave as part of their annual salary.

DEPUTY PRESIDENT

Appearances:

Mr S Crawford, Australian Workers’ Union

Mr T Dixon, Counsel, for the respondent

Hearing details:

2011
GRIFFITH
14 & 15 June

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